What are Assumable Loans?

Assumable Loans are basically loans that can be assumed by another party. The person assuming the loan will simply begin to make the payments as they come due when the title is transferred.

How They Work

These assumable loans were popular in the 1970's and 80's. Transfer of the title could occur without the lenders permission. Today, getting permission from the lender is a requirement unless it is a VA or FHA loan, which can be transferred without first getting permission to do so.

Benefits of Assumable Loans

When current rates are high, there is an advantage in taking over an assumable loan as the rate will stay the same after transfer of the title. The one downfall however is that if rates are low when you assume the loan, you may end up paying more interest than you otherwise would have.

For people with bad credit, these loans can put you into a home that you otherwise may not have gotten into. Another key benefit to an assumable loan is that you will avoid closing costs that otherwise would have been tacked on.