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Stephen and Anslie Spitler were at a loss: They were expecting a third child and their 1980s-built, three-bedroom house could no longer accommodate their growing family. Moreover, the couple could not find an affordable home that suited their need for more space and was in a good school district—a feature the two Georgia-based high school teachers prioritized. 

The Spitlers wanted to find their forever home, but the more they looked, the more it felt out of reach. When many homebuyers think about what it was like to buy a single-family home a few years ago—when the average 30-year fixed mortgage rate was below 3%—versus buying that same home today, the affordability gap feels more like a chasm. But this couple found a way to bridge the gap: an assumable mortgage.

In late June, the Spitler family closed on their dream home. Using the real estate portal Roam, the Spitlers found and bought a house with an assumable interest rate of 2.5%. This is the house they wanted to raise their children in—and now they could afford it.

Assumable mortgages allow an existing loan on a property to be transferred to those buying that property. An assumable mortgage transfers the existing loan’s interest rate, the remaining loan balance, and the remaining term of the loan.

Assumability clauses are most commonly found on government-backed loans, including FHA, VA, and USDA-backed mortgages. However, these only account for a small fraction of homes for sale at any given time, around 10% to 15%, according to Keith Gumbinger, a mortgage industry expert with more than three decades of experience and vice president of HSH.com, a publisher of mortgage and consumer loan information.

Today’s market conditions make the idea of an assumable mortgage rate particularly attractive, as current mortgage rates and affordability levels are in stark contrast to those in early 2021.

ResiClub reported in May that the effective rate on outstanding U.S. mortgages is 4.0%—significantly lower than the current average 30-year fixed mortgage rate of 6.87%.

“Most people are shocked by this but there are actually millions of [potentially] assumable loans,” Roam CEO Raunaq Singh told ResiClub in November.

Is there a catch?  

A 2.5% fixed-rate mortgage in 2024 may sound too good to be true—and for many it is. And the process is not without some obstacles.

“Assumable mortgages are theoretically available, but for most, not practically available,” Gumbinger explains.

There are two main hurdles to purchasing a home with a lower assumable mortgage rate:

1. The homebuyer usually needs to make up the difference between the outstanding loan balance and the purchase price of the house. Due to rapid home price appreciation over the last few years, a homebuyer looking to assume a low-rate mortgage will likely need significant cash holdings to make it work.
2. The homebuyer has to work with the seller’s lender, who isn’t always incentivized to help and may be unfamiliar with the process.

“Unlike making a new loan to a buyer, helping you assume an existing mortgage isn’t likely a profitable process for the existing lender,” Gumbinger tells ResiClub. “The borrower or the borrower’s representative will likely need to be diligent to push the process along.”

To mitigate these friction points, Roam provides services to help buyers like the Spitler family.

First, the Roam Boost product allowed the Spitlers to take a second mortgage out for the big down payment they needed to assume the 2.5% rate. The Spitlers will briefly pay a 4.5% “blended” rate until this second loan is paid off. 

But even with taking out a second mortgage, the math is still in their favor. Compared to buying the home at the current market interest rate, the Spitlers are saving $660 per month now and will save $1,280 per month once the second mortgage is paid off.

Additionally, Roam connected Stephen and Anslie with a vetted agent who is skilled in explaining and facilitating the assumable rate mortgage process. Roam’s Singh told ResiClub in November that the company is “effectively your quarterback through that process and coordinating you through the closing.”

It’s important to note that even when Anslie was looking at homes on Roam.com, she knew she would not settle for an imperfect property just because it happened to have a lower assumable mortgage rate attached to it.

“Just because an assumable loan exists in a given [area] doesn’t mean that the home it is attached to is suitable, desirable, and affordable for your needs and budget,” Gumdinger says. “For most borrowers, it’s more likely that finding the right house is of greater importance, and if a low-rate assumable mortgage can also be had, that would be a bonus.”