Take over the seller's low rate: payment, gap financing and savings vs a new loan
Updated 2026-10-02
Assuming a mortgage means you take over the seller's loan at their rate, then pay the difference between the price and the balance in cash or with a second loan. Your payment is the assumed loan's payment plus the second loan's. Enter the price, the balance and rate you would assume, and your cash: the calculator compares it with a new loan at today's rate. Price a new loan · VA loan calculator.
The deal
Assume vs new loan
Monthly payment if you assume
$2,259.07
assumed $1,422.63 + second loan $836.44
New loan at today's rate
$2,661.21
on $400,000 over 30 years
Monthly savings
$402.14
interest saved $330,500
Cash at closing
$101,500
equity gap $200,000 · fee $1,500
Estimates for planning, not a loan offer or financial advice. Every rate and cost here is a number you enter or an example you can change; confirm figures with your lender.
How the comparison works
Gap = price − balance · Second loan = gap − cash · Assume = PMT(balance, assumed rate, months left) + PMT(second, its rate, its term) · New = PMT(price − cash, today's rate, 30 yr)
PMT is the standard fixed-rate payment, L × r ÷ (1 − (1 + r)−n), with r the monthly rate and n the months. The assumed loan keeps the seller's rate and only the months it has left, so it also pays off sooner than a new 30-year loan. The new-loan comparison uses the same cash as a down payment. Interest saved compares the remaining interest on both paths, so a short remaining term helps the assumption twice. Taxes, insurance and mortgage insurance are left out because they are similar either way (FHA loans keep their annual MIP when assumed).
Worked example
A $500,000 home has a $300,000 loan at 3% with 25 years left. The equity gap is $200,000; with $100,000 cash you borrow $100,000 on a second loan at 8% for 20 years. Payments are $1,422.63 + $836.44 = $2,259.07. A new $400,000 loan at 7% costs $2,661.21, so the assumption saves $402.14 a month and $330,500 of interest. Covering the whole gap in cash ($200,000) cuts the payment to $1,422.63.
Assumption scenarios
Assumed payment vs a new loan at 7% (second loans at 8% for 20 years)
Deal
Assume (monthly)
New loan
Monthly savings
$400k, $320k at 3%, $80k cash
$1,442.24
$2,128.97
$686.73
$500k, $300k at 3%, $100k cash + $100k 2nd
$2,259.07
$2,661.21
$402.14
$500k, $300k at 3%, $200k cash
$1,422.63
$1,995.91
$573.27
$600k, $250k at 2.75%, $120k cash + 2nd
$3,110.57
$3,193.45
$82.88
$450k, $380k at 4.5%, $70k cash
$1,991.12
$2,528.15
$537.03
Which loans can be assumed
VA loans: assumable by veterans and non-veterans with servicer approval. VA charges a 0.5% funding fee on assumptions (VA.gov funding fee chart, checked October 11, 2026).
FHA loans: assumable by a buyer who qualifies under FHA credit rules; the loan's mortgage insurance carries over.
USDA loans: assumable in some cases, usually with new rates and terms.
Conventional loans: usually not, because of the due-on-sale clause.
Common mistakes
Ignoring the gap. A low rate on a small balance can lose to a new loan once a large gap is financed at a high second-loan rate. Run your numbers.
Comparing payments over different terms. The assumed loan has fewer years left, so its payment is higher per dollar than a 30-year loan; compare interest too.
Forgetting approval time. Assumptions often take longer than a new loan. Give the contract enough time.
This is an estimate for planning, not a loan offer. The servicer's approval letter and your Loan Estimate for any second loan are final.
Frequently asked questions
What is an assumable mortgage?
A loan the buyer can take over from the seller, keeping the seller's interest rate, balance and remaining term. Government-backed loans (FHA, VA and USDA) are generally assumable with the servicer's approval; most conventional loans have a due-on-sale clause that prevents it.
How do you calculate the payment on an assumed mortgage?
The assumed loan keeps its rate and remaining term, so its payment is the standard formula on the balance over the months left. $300,000 at 3% with 25 years left is $1,422.63 a month. Add the payment on any second loan used to cover the gap between the price and the balance.
How do you pay the seller's equity?
The gap between the price and the balance goes to the seller at closing, in cash or with a second loan. On a $500,000 home with $300,000 assumable, the gap is $200,000. With $100,000 cash, a $100,000 second loan at 8% for 20 years adds $836.44 a month.
Is assuming a mortgage worth it?
When the assumable rate is well below today's rate, usually yes. In the example the assumption costs $2,259.07 a month against $2,661.21 for a new 7% loan, saving $402.14 a month. The larger the gap you must finance at a higher rate, the smaller the saving.
What fees apply to a VA loan assumption?
VA charges a funding fee of 0.5% of the loan balance on an assumption (VA.gov funding fee chart). On $300,000 that is $1,500. Servicers also charge processing fees, which vary.
Does the seller lose their VA entitlement?
Unless the buyer is an eligible veteran who substitutes their own entitlement, the seller's VA entitlement stays tied to the loan until it is paid off, which can limit the seller's next VA loan.
Do I still have to qualify to assume a loan?
Yes. The servicer checks credit and income much like a new loan, and approval can take longer than a standard purchase, so build that time into the contract.