- Mortgage rates are falling but remain high compared to the rates of the past few years.
- Assumable mortgages can help homebuyers get lower rates and reduce their monthly payments.
- Here are three homebuyers who got rates under 3% in the past two years with assumable mortgages.
Over the past few years, US mortgage rates have fluctuated wildly, leaving both homebuyers and sellers scrambling.
In 2021, rates fell to as low as 2.1% as the Federal Reserve acted to keep the economy ticking during the COVID-19 pandemic. But then inflation spiked. To cool inflation, the Fed implemented a series of rate hikes, pushing mortgage rates to a peak of 7.79% in October 2023, according to data tracked by the Federal Reserve Bank of St. Louis.
But over the last few years, some homebuyers have used a workaround to get lower rates anyway: a lesser-known loan option called an assumable mortgage.
Assumable mortgages let qualifying buyers take over a seller's existing loan, including its interest rate, principal balance, and other terms.
This can lead to significantly lower interest rates, making monthly mortgage payments more affordable and saving thousands over the life of the loan. It's important to note that not all loans are eligible for assumption, but ones backed by the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA) are.
2024, however, has brought some relief from high rates.
In January, rates hit about 6.7% and have been slowly decreasing since. According to Freddie Mac, the 30-year fixed-rate mortgage dropped to 6.2% as of mid-September, its lowest level since February 2023.
The Federal Open Market Committee, which oversees US monetary policy, is expected to cut interest rates at its meeting this week. This could lead to further declines in mortgage rates in the coming months.
Still, the 2%-ish rates of 2021 aren't likely to return as the Fed remains wary of inflation. So while additional rate declines may ease monthly mortgage payments for some, they won't necessarily make homebuying significantly more affordable for most Americans.
For that reason, assumable mortgages still might be the best option for some people to get the lowest rates.
Here are the stories of three homebuying couples who secured mortgage rates below 3% since March 2023 using assumable mortgages.
They described how they redirected the funds they would have spent on higher monthly mortgage payments into healthcare, renovations, or retirement.
One couple got a 2.6% rate and became the youngest homeowners in their families
In 2022, Grace Lucchese had just graduated from college. Her partner, Mickey Ricard, had finished his military service two years prior.
The Gen Z couple had moved into an apartment in Lucchese's hometown of Sudbury, Massachusetts — a town about 40 minutes outside Boston — and found themselves spending much of their incomes on rent.
"We were paying ridiculous prices for rent, and our money was going nowhere," Lucchese told Business Insider. "We also have a dog with special needs, so we wanted to find a home with a backyard."
For the first-time homebuyers, finding an affordable, well-maintained home in their area was challenging.
"During our homebuying search, we looked all around Boston," Lucchese said. "We could not find a home that was move-in ready and under $650,000. We put offers on probably seven different homes and got into bidding wars on two."
After months of searching and nearly giving up, Lucchese and Riccard finally found their perfect home: a 1,600-square-foot, two-story Colonial built in 1885 with three bedrooms and one bathroom.
The home also came with an assumable mortgage.
"Our home was originally listed for $429,000," Lucchese said. "When we were negotiating with the seller and trying to talk him down on the price, they brought up the assumable loan — I had no clue what that type of mortgage was."
After learning about assumable mortgages and realizing they could take over the homeowner's 2.6% rate, they jumped at the opportunity.
In January, they made a $13,000 down payment and bought the home for $422,500. With homeowners' insurance included, their monthly payments are around $2,100 — about half of what they would likely pay if they had gotten a traditional mortgage earlier this year. Their mortgage term is 26 years.
The couple, now the youngest homeowners in both of their families, are using their monthly savings to renovate their home and help cover their dog's veterinary expenses.
"Now that our assumable mortgage is saving us about $2,000 each month, it makes the stress a little less because we have the option of having more money available," Lucchese said.
Retirees who got a 2.75% rate say their lives are easier
In June, Brian Sankey, a retired military police officer, purchased a $400,000 home in Elizabethtown, Kentucky — a small town south of Fort Knox — with an assumable Veterans Affairs, or VA, mortgage.
The loan has a 2.75% interest rate and 26 years remaining on its 30-year fixed-rate term.
Sankey said it was "a win-win" situation for him and the seller.
"The benefit of a loan assumption for the seller was that it allowed them to sell their home at a higher price," Sankey told BI. "For my wife and me, it allowed us to get a lower interest rate."
Sankey said he learned about the assumption feature of Veterans Affairs mortgages years ago but had forgotten about it over time.
It wasn't until he came across the four-bedroom, four-bathroom home in Elizabethtown that his memory was jolted.
The home's proximity to an Army base led Sankey to suspect that the sellers might be connected to the military and have taken out a VA loan, making an assumable mortgage possible.
He was right.
However, getting the seller on board wasn't as easy as Sankey had hoped.
"They weren't inclined to do it at first because they felt the assumption process would take too long, and they were looking for a quick sale," he said. "But after about 30 days, they realized that cash buyers wouldn't be throwing money at them and agreed to proceed with the assumption."
According to Sankey, the assumption process took just about six weeks from the time he and his wife first viewed the home to closing the loan.
"I'm happy I remembered it because it made our home purchase more affordable," he said. "Despite the current market conditions and higher interest rates, my wife and I were able to purchase a larger home with lower monthly payments."
A smaller mortgage is allowing Sankey and his wife to retire more comfortably.
"I can now use the money I would have spent on high-interest payments to cover living expenses," Sankey said. "We should also have more discretionary income."
A couple is able to pay down medical debts after buying a house in Oregon
In 2022, Amy Yzaguirre was diagnosed with cancer.
At the time, she and her son were living in Idaho while her husband looked for a job in Oregon.
They had planned to reunite in Oregon after he found one and their Idaho home sold. However, following her diagnosis, the couple decided it was best to be together before the Idaho home was sold.
Faced with the financial burden of paying the Idaho mortgage and Oregon rent at the same time, they moved into an RV on her parents' property in Tigard, a suburb about 20 minutes outside Portland.
"It was pretty rough, but we made it work," Yzaguirre told BI.
They lived rent-free in the RV for months while waiting for their Idaho home to sell and Yzaguirre to recover. Then, they began searching for a home to buy in Tigard.
It wasn't the experience they had hoped for.
"It's funny how an area can be a nice, family-friendly, affordable place to live and then suddenly become overpopulated and much more expensive," she said.
They eventually toured a townhome in nearby Sherwood listed for $416,000. The seller's flyer noted that a buyer could take over their 2.5% mortgage rate.
"I did the math," Yzaguirre said. "The seller was locked in at 2.5%, so if we qualified to assume the loan, our mortgage would be a little over $2,100 a month versus the over $3,000 we would be paying with a traditional mortgage at current market rates. It would save us over $40,000 in the long run."
In March 2023, the couple purchased the townhome for $418,900. They made a down payment of $48,000 and assumed a 30-year fixed-rate FHA loan with an interest rate of 2.5%. They have 28 years left on their mortgage.
The money they are saving each month is helping them pay down Yzaguirre's bills.
"Even though I was fortunate to have good insurance during chemotherapy and have excellent insurance through my current job, I still had quite a few medical bills to pay off," she said. "With the extra money we have saved on our mortgage payment, I've been able to pay them down."
The family also used some of their extra funds to pay off other debts and purchase a Toyota Tacoma pickup truck with cash, covering the full amount upfront
