Is assuming a seller’s low-rate mortgage worth it? Use our assumable mortgage calculator to determine your blended interest rate and total savings by combining an assumed loan with a second mortgage for the price gap.
assumable mortgage calculator
assumable mortgage calculator Formula
To evaluate an assumable mortgage, we calculate the Blended Rate, which is the weighted average interest rate of the assumed loan and the second mortgage (gap loan).
Gap Loan = Gap – Cash Down Payment
Blended Rate = [(Loan1 x Rate1) + (Loan2 x Rate2)] / Total Debt
Variables
- Gap: The difference between the home price and the seller’s loan balance.
- Gap Loan: A second mortgage needed if you don’t have enough cash to cover the full gap.
- Blended Rate: Your “effective” interest rate across both loans.
Related Calculators
- FHA Loan Calculator (Assumable)
- VA Loan Calculator (Assumable)
- Refinance Breakeven Calculator
- DTI Calculator
What is an Assumable Mortgage Calculator?
An assumable mortgage calculator helps buyers determine if taking over a seller’s existing mortgage is financially beneficial. Many FHA and VA loans are “assumable,” meaning a qualified buyer can take over the seller’s interest rate and remaining balance.
The challenge is the “Gap”—the difference between the purchase price and the assumed loan balance. If you don’t have the cash to pay this difference, you’ll need a second mortgage at current market rates. This tool calculates whether the combined cost is still cheaper than getting a new loan for the entire home.
How to Calculate Assumable Mortgage Savings (Example)
- Identify Gap: Price ($450k) – Assumed Loan ($300k) = $150k Gap.
- Determine Second Loan: If you have $50k cash, you need a $100k second mortgage (Gap Loan).
- Calculate Payments: Calculate payment for the $300k at 3.5% (Assumed) and the $100k at 7.0% (Market).
- Compare: Sum the payments and compare them to a brand new $400k loan at 7.0%.
Frequently Asked Questions (FAQ)
Generally, FHA, VA, and USDA loans are assumable. Most conventional loans (Fannie Mae/Freddie Mac) are not assumable.
Yes. You must meet the lender’s credit and income requirements to take over the loan liability from the seller.
The gap is the difference between the sale price and the remaining balance on the assumed loan. This must be paid in cash or financed with a second mortgage.
Assumption fees are usually capped (e.g., by FHA or VA) and are often lower than origination fees for a new loan, but you may still have title and recording fees.