What Is an Assumable Loan and Why Does It Matter in Today’s Market?

With interest rates hovering near 20-year highs (averaging 6–7% in 2025), affordability has become one of the biggest challenges for buyers. But there’s one financing option that’s getting renewed attention: the assumable loan.

What Is an Assumable Loan?

An assumable loan is a mortgage that allows a buyer to take over the seller’s existing loan, including the interest rate, remaining balance, and repayment schedule. This can be a huge financial advantage when the seller locked in a much lower interest rate years ago.

For example:

• A seller may have a mortgage at 3% from 2020.

• Today’s buyer would normally need a new loan at 6.75%.

• By assuming the seller’s loan, the buyer could save hundreds per month on payments.

Which Loans Are Assumable?

Not all loans can be assumed. According to the U.S. Department of Housing and Urban Development (HUD), these typically qualify:

• FHA loans – Popular among first-time buyers.

• VA loans – Available to veterans, service members, and eligible spouses (with some restrictions).

• USDA loans – For rural and suburban homebuyers.

Most conventional loans (backed by Fannie Mae or Freddie Mac) are not assumable, unless specifically structured that way.

Pros and Cons of Assumable Loans

✅ Benefits

• Lower Interest Rates – Buyers can secure a below-market rate.

• Affordability – Lower monthly payments can make more homes attainable.

• Seller Advantage – Homes with assumable loans stand out in a competitive market.

⚠️ Drawbacks

• Qualification Required – Buyers still need to qualify with the lender.

• Equity Gap – If the seller’s loan balance is much lower than the home price, buyers must cover the difference in cash or take a second loan.

• Limited Availability – Only certain government-backed loans allow this.

Why Assumable Loans Are a Hot Topic

With housing affordability tightening, assumable loans are becoming a key selling point. In fact, NAR (National Association of Realtors) notes that creative financing options like this are drawing increasing interest from Millennials and Gen Z, who are seeking ways to offset high borrowing costs.

If you’re a seller, having an assumable loan could give you a competitive edge. If you’re a buyer, it could be the difference between affording a home or being priced out of the market.

Next Steps

If you’re curious whether your loan is assumable—or if you’re a buyer interested in homes with this option—talk with your lender or a trusted real estate agent. You can also explore resources directly from:

• FHA Loans – HUD

• VA Home Loan Benefits

• USDA Single Family Housing Programs

👉 Bottom line: Assumable loans aren’t available for everyone, but when they are, they can offer a major financial advantage. For buyers, it’s a way to lock in yesterday’s rates. For sellers, it’s a powerful marketing tool that could make your listing stand out in today’s market.