As mortgage rates stagnate about 6%potential homebuyers are nostalgic for the 3% interest rates in 2020 and 2021. “Assumable Mortgage” The spike in May follows a steady rise that began in 2022.
Mortgage Assumption allows a buyer to take over an existing mortgage at current interest rates, which can be as low as 2% or 3% depending on when the original mortgage was drawn down.
Mortgage hypotheticals were a popular way to buy a home in the 1970s and 1980s, but have largely faded from the public consciousness. The Garne Saint-Germain Act of 1982 allowed private lenders to enforce due-on-sale clauses requiring full payment when the property changed hands, making assumable mortgages virtually obsolete except in cases of divorce and inheritance.
Now, a rarity in the U.S. real estate market, outside buyers can still assume certain categories of mortgages: Veterans Affairs, FHA, and USDA mortgages.
“Twenty to 25% of homes on the market will be completely taken over at one time,” said Roam founder and CEO Raunaq Singh. However, “the number of hypothetical transactions that are happening is far smaller than the number of mortgages that can be hypothetically taken.”
In 2023, only 4,052 FHA-backed mortgage assumptions were completed. VA saw an even bigger increase compared to 2021, with 2023 mortgage assumptions increasing by 713%. indivual.
watch video See above to learn more about affordable mortgages, how they work, and why they come with their own set of hurdles.
