With mortgage rates soaring, taking over existing mortgages is gaining steam
Freddie Mac says 30-year fixed mortgage rates rose to their highest level in more than 20 years. This has made things tougher on homebuyers because of a lack of supply and demand.
As mortgage rates continue their upward climb after reaching highs not seen in more than 20 years, another trend not seen in decades has reemerged: More buyers are looking to assume a seller's loan in order to avoid today's interest rates.
An assumable mortgage allows homebuyers to take over a seller's existing mortgage rather than applying for a new one, thereby allowing them to take over the terms, including the interest rate. These transactions were popular in the 1970s and 80s, and now with current mortgage rates hovering around 8% and millions of homeowners locked in at rates much lower, assuming a seller's loan is becoming more attractive again.
A sign outside a home for sale in Atlanta, Georgia, US, on Wednesday, Sept. 6, 2023. Mortgage assumptions are gaining steam as an attractive option for sellers looking to avoid today's high interest rates. (Elijah Nouvelage/Bloomberg via Getty Images / Getty Images)
The option is not available for conventional loans, but mortgages backed by government agencies including the Veterans Administration (VA), United States Department of Agriculture (USDA) and Federal Housing Administration (FHA) have assumable functions, and make up roughly 22% of active mortgages, according to a recent report from The Wall Street Journal.
That's a sizable chunk, and some realtors are now pushing assumable loans as a solution for potential buyers who cannot afford a home at today's elevated prices.
MORTGAGE RATES RISE AGAIN AMID WORSENING HOME AFFORDABILITY CRISIS
Christopher Tapia is a real estate agent for Compass
Read more on foxbusiness.com
