Every agent has heard the pitch by now: find a house with a 2.75% VA or FHA loan, let your buyer take it over, and save a fortune. Sometimes that's exactly right. Sometimes the equity gap eats the savings, the timeline kills the deal, or the seller gets hurt in a way nobody explained to them. With the Freddie Mac 30-year average back above 7% in late September 2026, this is worth getting right. Here's how to run the numbers before you write the offer.
If you need the basics first (who can assume, VA vs. FHA vs. USDA rules, and where title insurance fits), start with Assumable Mortgages Demystified. This post is the math.
The example we'll use
A hypothetical Colorado Springs house. All figures are principal and interest only, since taxes and insurance are the same no matter how the buyer finances.
- Seller's VA loan: $380,000 at 2.75%, originated in fall 2021, 30-year term
- Seller's payment: about $1,551/month
- Remaining balance after 5 years: about $336,300, with 25 years left
- Sale price: $450,000
- Equity gap: $450,000 − $336,300 = about $113,700
- New-loan comparison rate: 7.00%, 30-year
That $113,700 is the whole story. The assumption doesn't finance it. The buyer covers it with cash, a second lien, or some combination.
Scenario 1: The buyer has the cash
If the buyer can write a check for the full gap, the comparison is simple: same cash in, same loan balance, different rate.
| $113,700 down | Assume at 2.75% | New loan at 7.00% |
|---|---|---|
| Loan amount | $336,300 | $336,300 |
| Monthly P&I | $1,551 | $2,237 |
| Interest paid, first 5 years | ~$42,900 | ~$114,500 |
| Principal paid, first 5 years | ~$50,200 | ~$19,700 |
| Years left on loan | 25 | 30 |
About $686 a month less, and over the first five years the buyer pays roughly $71,000 less interest and builds about $30,000 more equity through principal paydown. That's the version of the deal everyone talks about, and it's real.
The catch: very few buyers have $113,700 sitting around. Most of the buyers who need a low payment are the same buyers who don't have six figures in cash.
Scenario 2: The buyer has $30,000 and finances the rest
This is the more realistic version. The buyer puts $30,000 down and covers the remaining $83,700 of the gap with a second lien. Second-lien pricing varies a lot, so the example assumes 9% on a 30-year term.
| $30,000 down | Assume + 2nd at 9% | New loan at 7.00% |
|---|---|---|
| First lien | $336,300 at 2.75% — $1,551 | $420,000 at 7.00% — $2,794 |
| Second lien | $83,700 at 9.00% — $674 | — |
| Total monthly P&I | $2,225 | $2,794 |
Still about $569 a month cheaper. The blended rate stays low because the big balance is at 2.75% and only the smaller piece carries the higher rate.
How expensive can the second get before the assumption stops winning on payment? In this example, further than most people guess:
- Second at 10%: $2,286 total
- Second at 12%: $2,412 total
- Second at 14%: $2,543 total
- Second at 16%: $2,677 total — still under the $2,794 new-loan payment
A shorter second changes the picture in a good way. The same $83,700 at 9% over 10 years runs about $1,060 a month, so the total is roughly $2,612. That's still below the new loan, and the second is gone in a decade while the first keeps chipping away at 2.75%.
When the gap gets bigger
The more equity the seller has, the less the assumption helps, because more of the purchase gets financed at the higher rate. Same loan, same $30,000 down, second at 9%:
| Sale price | Second lien needed | Assume + 2nd | New loan at 7% | Monthly savings |
|---|---|---|---|---|
| $450,000 | $83,700 | $2,225 | $2,794 | $569 |
| $500,000 | $133,700 | $2,627 | $3,127 | $500 |
| $550,000 | $183,700 | $3,030 | $3,460 | $430 |
The savings shrink, but the bigger issue is usually qualifying. A buyer carrying two loans needs the income to support both, and a large second lien is harder to place than a small one. The sweet spot is a low-rate loan with a balance close to the sale price, which usually means a loan originated in 2020–2022 on a house that hasn't appreciated a ton since.
Costs and catches that don't show up in the payment
- VA funding fee on the assumption: 0.5% of the balance assumed. On $336,300, that's about $1,700, unless the buyer is exempt.
- FHA mortgage insurance: Most FHA loans from mid-2013 on carry annual MIP for the life of the loan, and it comes with the assumption. Add it to the assumed payment before comparing. A conventional loan with 20% down has no mortgage insurance at all.
- Timeline: Assumptions run through the servicer, not a lender you pick. Plan on 45 to 90 days and write the contract dates to match. A 30-day close on an assumption is a setup for an extension.
- Second-lien availability: Not every second-lien lender will sit behind an assumed first, and the servicer has to be fine with it. Line this up before the offer, not after.
- The seller's VA entitlement: If a non-veteran assumes, the seller's entitlement stays tied to that loan until it's paid off. A seller who plans to buy their next home with a VA loan needs to know that before they agree.
- Release of liability: Make sure the seller is formally released. Without it, they can stay on the hook for a loan on a house they no longer own.
A quick way to decide
- Get the loan type, rate, current balance, and servicer from the listing agent. MLS rarely tells you.
- Subtract the balance from the likely sale price. That's the gap.
- Figure out how much the buyer can actually bring in cash, and price a second lien for the rest.
- Compare total payment (including MIP on FHA) against a new loan with the same cash down.
- Confirm the buyer qualifies with both payments, and that the closing date allows for servicer timelines.
- Talk with the seller about entitlement and release of liability before anyone signs.
If the payment difference is a few hundred dollars a month and everything else checks out, it's worth the extra time. If the gap is huge, the second lien is hard to place, or the seller needs their VA entitlement back, a regular purchase may be the better answer.
Where the title company fits
An assumption still closes like a sale. The buyer is taking title, so there's a full title search, an owner's policy to protect the cash they're bringing in, and a settlement statement that has to reflect the assumed balance, the second lien, and any escrow account transfer correctly. A second lien also has to record in the right position behind the assumed loan. Getting the title order open early helps flush out judgments or liens that attached after the seller bought, which is one of the more common reasons these deals stall late.
Frequently asked questions
How do you calculate the equity gap on an assumable loan?
Subtract the current loan balance from the sale price. On a $450,000 sale with a $336,300 balance, the gap is about $113,700. The buyer covers that amount with cash, a second lien, or both. Ask the listing agent for a current payoff or balance figure rather than estimating from the original loan amount.
Is an assumable loan still worth it if the buyer needs a second mortgage?
Often, yes. In the example above, assuming a 2.75% loan and financing $83,700 of the gap with a 9% second came out about $569 a month cheaper than a new 7% loan with the same $30,000 down. The savings shrink as the gap grows, and the buyer has to qualify for both payments, so run the actual numbers on each deal.
What does it cost to assume a VA loan?
The VA funding fee on an assumption is 0.5% of the balance being assumed, unless the buyer is exempt. The servicer may also charge processing fees, and the buyer still has normal closing costs, including title insurance and settlement fees.
How long does a loan assumption take to close?
Plan on roughly 45 to 90 days, depending on the servicer and loan type. FHA assumptions tend to run faster than VA. Set contract deadlines with that range in mind.
Does FHA mortgage insurance transfer on an assumption?
For most FHA loans originated since mid-2013, yes. The annual MIP stays with the loan for its life, so the buyer takes it over. Add it to the assumed payment before comparing against a new loan.
Example figures are hypothetical and rounded, show principal and interest only, and assume a 7.00% new-loan rate and a 9.00% second-lien rate for illustration. Actual rates, fees, and program rules change; confirm current terms with the loan servicer and a qualified lender. This article is general education and is not legal, tax, or lending advice.