What is an assumable loan? An assumable loan is a loan that can be taken over by somebody else while keeping the current term that’s left, the current interest rate that’s on there, and whatever the current principal balance is.
A question I get asked a lot is, if I have an assumable loan with a low interest rate and I’m looking to sell my house, can I advertise that my loan is assumable and have the person purchasing the house take over that loan to entice them with the lower interest rate? The short answer to this is yes, but it comes with some stipulations.
How the Assumption Process Actually Works
When doing an assumable loan, you’re only taking over the principal balance. But when you’re selling your house, you’re selling it for whatever the market value is. So there’s going to be a difference between the two. The person buying your house, if they’re going to assume your loan, needs the cash difference between what you’re selling it for and what the loan balance is.
A quick example of this is if your loan balance is $200,000 and that’s what they’re going to assume, and you’re selling it for $400,000, you need to find a buyer that can put $200,000 cash toward the transaction to cover that difference.
Also, the assumability process can sometimes take a while with servicers. So you want to make sure that the time they’re going to take to process this also works for your situation.
Steps to Assume a Mortgage in Arizona
If this is something you’re looking to do, step number one would be to call the servicer of your loan and see if your loan is assumable, and if so, what are the steps and processes to get that done and how long that process would take.
