Lower and The TW Team
Loan Assumption Calculator
Loan assumption

Taking over a rate that no longer exists

A VA or FHA loan written in 2020 is assumable, and the rate comes with it. What does not come with it is the seller's equity, you assume the balance, not the price, and the gap between them has to be covered in cash or borrowed at today's rate. This prices the whole structure, reports the blended rate it really produces, and shows what the assumption costs the seller in VA entitlement.

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An estimate from your figures, not a rate quote, not advice, and not an offer of credit.

The Deal

Loan being assumed

Only VA, FHA and USDA loans are assumable. A conventional loan is not, its due-on-sale clause ends the conversation.

Off the seller's statement. This matters more than people expect, the payment is computed over what is left, not over thirty years.

The equity gap comes out of this first, then the assumption fee and the closing costs.

Whatever the cash does not cover. Example figures, not our pricing, a second behind an assumed first is priced on its own merits and is normally well above a first mortgage rate.

What you would pay to finance the same purchase conventionally, with the same cash in. That is the comparison.

VA specifics

The first of these is the single most important box on this page, and it is about the seller. Without a substitution the seller's entitlement stays attached to this property until the loan is paid off.

The Equity Gap

Against Financing It At Today's Rate

Same house, same day you walk away, same cash in your pocket at the start. What each one costs is everything you paid plus everything you still owe, a structure that leaves a bigger balance behind has not saved you anything.

Assuming the seller's loanA new loan today

Reference

How an assumption actually works

Written from VA and HUD guidance rather than from the enthusiasm currently attached to the subject. Assumptions are real, they are rarer than the coverage suggests, and the reasons are arithmetic.

You assume the balance, not the price

This is the whole difficulty in one line. A house at $750,000 with $420,000 left on the seller's loan leaves $330,000 of the seller's equity to be bought, and it has to come from cash or from a second lien at today's rate.

The older the loan, the better the rate and the larger the gap, the two move against each other, always. A 2021 loan four or five years in has usually seen enough appreciation and amortisation that the equity is the larger half of the purchase price.

That is why most assumptions that look wonderful in an article do not happen. Not because anybody refused: because nobody had the cash.

The remaining term is not thirty years

An assumed loan keeps its own clock. A 2.875% note with 24 years left has its payment computed over 24 years, and that payment is larger than a headline rate suggests.

This is not a penalty, you are paying the loan off sooner and the amortisation is well advanced, so far more of each payment is principal than on a fresh loan. But it does mean the monthly saving against today's rate is smaller than the rate difference implies, and the calculator above shows both figures side by side rather than letting the headline rate do the talking.

The second lien is where the advantage goes

If cash cannot cover the gap, the rest is borrowed, and a second mortgage sitting behind an assumed first is priced on its own merits, normally well above a first mortgage rate.

The right way to read the result is the blended rate: the single rate at which the present value of both payment streams equals the total amount financed. Two loans with different rates and different terms have no meaningful average, because the payment is not level, the second finishes first and the payment drops. The calculator solves for the rate rather than averaging.

A 2.875% first and an 8.5% second can blend to something that is still excellent, or to something worse than simply taking today's rate. Which one depends entirely on the size of the gap.

What a VA assumption costs the SELLER

The part nobody mentions, and it is not on the settlement statement.

Unless the buyer is an eligible veteran who substitutes their own entitlement, the seller's VA entitlement stays attached to that property until the loan is paid off. The amount is the guaranty on the loan, which is tiered under 38 USC 3703(a)(1)(A): 50% of a loan up to $45,000, $22,500 between $45,000 and $56,250, the lesser of $36,000 or 40% up to $144,000, and 25% above that. It does not come back when the seller moves out, and it does not come back with a release of liability.

Those are two separate things. A release of liability ends the seller's responsibility for the debt. Only a substitution of entitlement frees the benefit, and it has to be processed together with the release rather than afterwards.

The practical consequence is that the seller may not be able to buy their next house with no money down, which is usually the reason they wanted a VA loan in the first place. Sellers find this out afterwards.

VA Home Loan Buyer's Guide; application for assumption approval and release from liability, VA Form 26-6381.

If the buyer defaults, it is the seller's entitlement that suffers

Where entitlement was not substituted, a default on the assumed loan counts against the original veteran's entitlement and can affect their ability to get another VA loan, years later, on a house they have never seen, over a payment they did not miss.

That is why the holder underwrites the assumer's ability to repay before approving an assumption, and why the release and substitution documents matter so much to a seller. Any decision about who buys a home must of course comply with the Fair Housing Act.

Approval is not optional

A VA loan for which the commitment was made on or after 1 March 1988 cannot be assumed without approval. The holder may approve it where it has automatic authority; otherwise the package goes to VA. Either way the buyer is underwritten, credit, income, the lot.

An FHA mortgage closed on or after 15 December 1989 requires the servicer to credit-qualify the buyer. HUD has confirmed that the restrictive language in many 1986-to-1989 mortgages is not enforced and that those loans are freely assumable, with approval needed only to release the seller from liability.

So an assumption is a full loan approval that happens to come with a rate. A purchase contract written as though buyer and seller can simply agree it between themselves is a problem waiting to happen, and the timeline is often longer than a normal purchase rather than shorter.

The fees

VA: an assumption funding fee of 0.5% of the balance being assumed, paid in cash at closing and waived where the assumer is exempt. There is also a processing charge the holder may collect, which is capped.

FHA: no funding fee on an assumption. The existing mortgage insurance simply continues on its original terms, which cuts both ways, if the loan was written above 90% loan-to-value after June 2013, the premium runs for the life of the loan and the buyer inherits that too.

Neither is large next to the equity gap, and neither is the reason a deal does or does not work.

A conventional loan is not assumable in a sale

A conventional fixed-rate mortgage carries a due-on-sale clause, so as a practical matter there is no conventional loan to assume in an ordinary purchase.

Two real exceptions, neither of which is a sale. Federal law, the Garn-St Germain Act, 12 USC 1701j-3(d), bars a lender from enforcing that clause on a list of transfers including inheritance, a transfer to a spouse or child, a transfer under a divorce decree, and a transfer into a living trust where the borrower remains a beneficiary. And a conventional adjustable-rate loan is generally assumable on qualification by its own terms.

For buying a house from a stranger, though, assumable means government-backed: VA, FHA and USDA. That is why the pool is far smaller than the interest in the subject suggests.

Where the seller stands, and what to insist on

Sellers commonly ask their attorney about two documents, in writing, before closing: a release of liability, and where the buyer is an eligible veteran, a substitution of entitlement processed at the same time.

Without the first, the seller can remain liable for the debt. Without the second, the entitlement stays tied up. Neither is automatic, neither is anyone else's responsibility to obtain, and the leverage to demand both disappears the moment the deal closes.

What this page does not model

Seller financing of the equity gap, which is frequently how these deals actually get done. Interest-only or balloon structures on the second. A buydown on the second. The holder's processing charge, which varies. Property taxes, homeowner's insurance and association dues, which are identical either way and would only pad both columns.

It also assumes the assumed loan continues exactly as written, which is what an assumption is, the note does not change, only the person responsible for it.

Mortgage insurance on an assumed FHA loan continues on its original terms and is not modelled here; the mortgage insurance removal calculator works out when it ends.

Common Questions

The rules behind the numbers above, in plain language.

What does it mean to assume a mortgage?

You take over the seller's existing loan exactly as written, the same rate, the same remaining term, the same balance, and become responsible for it. The note does not change; only the person paying it does.

In a market where rates have risen a long way, that is the only route to a rate that is no longer available to anybody.

Which loans can be assumed?

VA, FHA and USDA loans. Conventional loans cannot be assumed, the due-on-sale clause means the lender calls the balance due when the property transfers.

That makes the pool much smaller than the interest in the subject suggests. It is worth asking when a listing is a few years old, but it is not something to build a search around.

Do I need a down payment to assume a loan?

You need the seller's entire equity, which is usually far more than a down payment. You assume the balance, so the difference between the purchase price and that balance is yours to cover in cash or to borrow.

On a loan a few years old with appreciation behind it, that gap is routinely the larger half of the purchase price. It is the single biggest reason assumptions do not happen.

Can I get a second mortgage to cover the gap?

Sometimes, and it is where the advantage goes. A second behind an assumed first is priced on its own merits and normally sits well above a first mortgage rate, so the blended cost is what matters rather than the headline rate on the first.

The calculator above solves for that blended rate properly rather than averaging the two, because the payment stream is not level, the second finishes first.

Does assuming a VA loan use my VA entitlement?

Only if you are an eligible veteran and you choose to substitute your entitlement, which is what frees the seller's. If you are not a veteran, or you are and you do not substitute, you can still assume the loan, but the seller's entitlement stays tied to the property.

If you do substitute, your own entitlement is committed to that loan until it is paid off, exactly as it would be on a VA loan of your own.

I am selling. What does letting someone assume my VA loan cost me?

The guaranty on the loan, 25% of the balance above $144,000, and more of it proportionally below that under the tiers at 38 USC 3703(a)(1)(A), tied to that property until the loan is paid off, unless the buyer is a veteran who substitutes their own. In practice that often means you cannot buy your next house with no money down.

You also stay exposed unless you get a release of liability in writing, and if the buyer later defaults it counts against your entitlement. Get both documents before closing, your leverage disappears afterwards.

Does a release of liability restore my entitlement?

No, and this is the most expensive misunderstanding on the subject. A release of liability ends your responsibility for the debt. It does nothing to your entitlement.

Only a substitution of entitlement frees the benefit, and it must be processed together with the release rather than sought later.

How long does an assumption take?

Often longer than an ordinary purchase, not shorter. The buyer has to be underwritten by the holder, and where the holder lacks automatic authority the package goes to VA. Servicers process assumptions in a different department from originations, and it is not a department built for speed.

Build the timeline into the contract rather than assuming a normal escrow.

Can the seller just let me take over the payments?

No. Approval is required on any VA loan closed after March 1988 and any FHA loan originated after December 1986, and the buyer is underwritten.

An informal arrangement where payments simply carry on leaves the seller legally responsible for the debt, leaves the buyer with no ownership protection, and is very likely to breach the note. It is not a shortcut, it is a different and much worse transaction.

Do I still pay mortgage insurance on an assumed FHA loan?

Yes, on the original loan's terms. You inherit whatever the seller had, including a life-of-loan premium if the loan was written above 90% loan-to-value after June 2013.

That is worth pricing before you fall in love with the rate. Our mortgage insurance removal calculator works out the date, or tells you there isn't one.

Is assuming always cheaper?

No. It is cheaper when the gap is small enough that cash covers most of it. Once a large second lien at today's rate is doing the work, the blended cost can land above simply financing the whole purchase conventionally, and the calculator above will say so.

The other thing to weigh is that the assumed loan has a shorter remaining term, which raises the payment and lowers the total interest. Whether that is good or bad depends on whether you need the monthly number or the lifetime one.

What happens to the seller's escrow account?

It is normally reimbursed to the seller at closing and a new escrow is funded by the buyer, which is real cash on top of the equity gap. Treat it as part of the cash to close rather than a detail, on a loan with high taxes it is not a small number.

Important disclosures

Taylor Weiner, mortgage loan originator, NMLS #263090  ·  Lower, LLC, NMLS #1124061  ·  5950 Symphony Woods Road, Suite 312, Columbia, MD 21044  ·  (714) 658-4912  ·  tweiner@twteam.com  ·  Verify licensing at nmlsconsumeraccess.org. Licensed to originate residential mortgage loans in California.

Not a government agency. The TW Team at Lower is not affiliated with, acting on behalf of, or endorsed by HUD, the FHA, the VA, the USDA, the FHFA, Fannie Mae, Freddie Mac or any other government agency. This page is not a government publication and has not been reviewed or approved by HUD, by the FHA, by the VA, by the USDA or by any other government agency. FHA loans are insured by the Federal Housing Administration and VA loans are guaranteed by the Department of Veterans Affairs; both are originated by approved lenders, not by the agencies themselves.

This calculator is an educational estimate based on figures you enter. It is not a rate quote, an offer of credit, a commitment to lend, or legal advice. Release of liability and substitution of entitlement are legal documents with consequences for both parties; a seller should consult their own attorney and confirm the position directly with VA. No rate on this page is offered or available; every rate field opens on an example figure you are expected to replace, and nothing on the page adjusts one. An assumption requires the approval of the loan holder and, on a VA loan, may require the approval of the Department of Veterans Affairs. Neither approval is within the control of this page, a buyer, a seller or a real estate agent.

Where the rules on this page come from

The VA assumption funding fee of 0.5% of the balance assumed, the requirement for approval where the commitment was made on or after 1 March 1988, the guaranty tiers used to estimate the entitlement, the distinction between release of liability and substitution of entitlement, and the effect of a later default on the original veteran's entitlement: 38 USC 3703(a)(1)(A), 38 USC 3714, the VA Home Loan Buyer's Guide and VA loan guaranty guidance on assumptions, with the application made on VA Form 26-6381. FHA assumability and the credit qualification required for mortgages closed on or after 15 December 1989: HUD Handbook 4155.1 and HUD's release-of-liability guidance.

The entitlement that remains tied to the property is estimated from the statutory guaranty tiers at 38 USC 3703(a)(1)(A). The exact entitlement charged on a particular loan is shown on the veteran's Certificate of Eligibility and should be confirmed there.

FHA assumability and the credit qualification required for mortgages closed on or after 15 December 1989, and the continuation of the existing mortgage insurance premium on its original terms: HUD Handbook 4000.1.

Scope and limits of this calculator

This page models an assumed fixed-rate first mortgage continuing on its existing terms, with the equity gap covered by cash and, where cash is insufficient, by a fully amortising second lien. It compares that structure against financing the same purchase at a rate you supply, with the same cash contributed, over a term you choose.

It does not model seller financing of the equity gap, an interest-only or balloon second, a buydown on either lien, the holder's processing charge, escrow reimbursement and re-funding at closing, or mortgage insurance continuing on an assumed FHA loan. Property taxes, homeowner's insurance and association dues are excluded deliberately: they are identical under either structure and including them would pad both columns without changing the comparison.

The entitlement figure is an estimate based on the standard 25% guaranty, not a statement of the entitlement charged on a specific loan. Any seller relying on it should confirm the position with VA and obtain a release of liability, and where applicable a substitution of entitlement, in writing before closing.

⌂ Equal Housing Opportunity. Lower, LLC is an Equal Housing Lender. We do business in accordance with the Federal Fair Housing Act and the Equal Credit Opportunity Act.

Fee percentages, approval requirements and agency guidance current as of September 2026.