Transparent method
The formula
Worked example
Example inputs
How to interpret the result
Assuming an existing mortgage means taking over its original rate and remaining balance, not the home's full purchase price, so the buyer usually has to bridge the gap between purchase price and remaining loan balance with cash or a second loan. That gap, not the attractive old rate alone, is what determines whether the deal actually works.
Before you rely on it
What to check
Size the cash-or-secondary-financing gap first, purchase price minus remaining assumable balance, before getting attached to the appeal of the old interest rate.
The common error
Where people go wrong with assumable mortgage calculator
Focusing on the assumed rate's appeal while underestimating the cash needed to bridge the gap between sale price and remaining balance. That gap is often the harder part of the deal to actually finance.
Sensitivity evidence
How purchase price changes the combined monthly loan payments
| Purchase price | Combined monthly loan payments | Secondary financing needed | Monthly savings vs. new 6.5% loan |
|---|---|---|---|
| $360,000 | $1,431 | $10,000 | $371 |
| $405,000 | $2,001 | $55,000 | $85 |
| $450,000worked example | $2,571 | $100,000 | -$201 |
| $495,000 | $3,141 | $145,000 | -$486 |
| $540,000 | $3,711 | $190,000 | -$772 |
Every input, tested
Which input moves the combined monthly loan payments most
| Input | Tested from | To | Combined monthly loan payments at each end | Swing |
|---|---|---|---|---|
| Purchase price | $405,000 | $495,000 | $2,001 to $3,141 | $1,140 (44%) |
| Secondary-financing term | 7.0 years | 13.0 years | $2,913 to $2,394 | $519 (20%) |
| Remaining assumed term | 19.0 years | 31.0 years | $2,851 to $2,403 | $447 (17%) |
| Assumable mortgage balance | $247,500 | $302,500 | $2,789 to $2,353 | $436 (17%) |
| Assumed mortgage rate | 2.0% | 4.0% | $2,432 to $2,718 | $286 (11%) |
| Secondary-financing rate | 7.0% | 11.0% | $2,465 to $2,682 | $216 (8.4%) |
| Buyer cash applied to gap | $67,500 | $82,500 | $2,666 to $2,476 | $190 (7.4%) |
Two variables at once
Combined monthly loan payments by purchase price and assumable mortgage balance
| Purchase price \ Assumable mortgage balance | $220,000 | $275,000 | $330,000 |
|---|---|---|---|
| $360,000 | $1,867 | $1,431 | $1,565 |
| $405,000 | $2,437 | $2,001 | $1,565 |
| $450,000 | $3,007 | $2,571 | $2,135 |
| $495,000 | $3,577 | $3,141 | $2,705 |
| $540,000 | $4,147 | $3,711 | $3,275 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Purchase price | $450,000 |
| Assumable mortgage balance | $275,000 |
| Assumed mortgage rate | 3.0% |
| Remaining assumed term | 25.0 years |
| Buyer cash applied to gap | $75,000 |
| Secondary-financing rate | 9.0% |
| Secondary-financing term | 10.0 years |
| Combined monthly loan payments | $2,571 |
| Secondary financing needed | $100,000 |
| Monthly savings vs. new 6.5% loan | -$201 |
Where the inputs come from
The assumable balance and rate come from the seller's mortgage statement, and the remaining term is the years left. FHA, VA and USDA loans are generally assumable with lender approval, while most conventional loans are not. Buyer cash applied to the gap is the down payment you can bring. Secondary financing covers the rest, so enter its rate and term from a quote.
Using the combined monthly loan payments in a real decision
If the gap is large, the second loan's higher rate can erase the savings, so the deal works best when the gap is small.
When the result stops applying
The lender must approve the assumption and may charge a fee, and the buyer must qualify. VA assumptions may leave the seller's entitlement tied up unless the buyer is a veteran who substitutes theirs. Timelines for assumptions can be long, and the seller usually wants to be released from liability.
What to compare it with
Verify with the seller's servicer that the loan is assumable and what the fee and approval timeline are. Then compare the blended payment with a new loan at the current rate using the mortgage payment calculator. The gap is the hurdle, so look at sellers with substantial equity in reverse: a small gap makes assumption attractive. Get a release of liability for the seller in writing so the deal is clean.
People also ask
Frequently asked questions
Which mortgages can be assumed?
FHA, VA and USDA loans generally can, with lender approval. Most conventional loans have due-on-sale clauses that prevent it.
What is the cash gap?
The difference between the purchase price and the balance you assume, which you must cover with cash or another loan.
Does the seller stay liable?
Not if the lender grants a release of liability, which the seller should request in writing as a condition of the deal. Without it, the original borrower can remain responsible if the buyer stops paying.