Can You Take Over a Seller’s Low Mortgage Rate When Buying a Home in Michigan?

Yes, in some situations, a qualified homebuyer may be able to take over a seller’s existing mortgage and its interest rate. It’s called an assumable mortgage.

And if the seller has one of those 2%, 3%, or 4% interest rates from a few years ago, you can probably understand why a buyer might want to know more.

But before you start searching for someone with a 3% mortgage 😂, there are a few important things both buyers and sellers need to understand.

What Is an Assumable Mortgage?

Normally, when you buy a home, you apply for a brand-new mortgage based on the interest rates and lending requirements available at that time.

An assumable mortgage can work differently.

With certain eligible loans, a qualified buyer may be able to take over the seller’s remaining mortgage balance, interest rate, and certain existing loan terms, subject to the loan requirements and approval by the mortgage servicer.

For example, imagine you're buying a home in Southeast Michigan and the seller has an eligible mortgage with a 3% interest rate.

Instead of financing the entire purchase with a brand-new mortgage at current rates, you may be able to assume the remaining balance of that existing loan at its lower rate.

That's where people usually say:

“Wait. You can actually do that?”

Sometimes, yes.

But there's a catch.

What Happens to the Seller’s Equity?

This is probably the biggest piece people miss.

Let's say a home is selling for $300,000.

The seller has $150,000 remaining on an assumable mortgage.

A qualified buyer may be able to assume that $150,000 mortgage, but the home still costs $300,000.

That leaves a $150,000 gap.

The buyer still needs an approved way to cover that difference.

Depending on the situation, that could involve cash or other financing. This is where a knowledgeable mortgage professional and the loan servicer need to be involved.

So an assumable mortgage does not mean:

“I'll take over your payments and you give me the house.”

There is much more to it.

Which Mortgages May Be Assumable?

Some government-backed mortgages, including certain FHA, VA and USDA loans, can potentially be assumed when their applicable requirements are met.

Conventional mortgages generally are not assumable in the same way, although the actual loan documents and servicer should always be checked.

The important question isn't simply:

“What's the seller's interest rate?”

It's:

“Is this particular mortgage assumable, and what would be required to assume it?”

Why Buyers in Michigan Should Know About This

For buyers, the obvious attraction is the interest rate.

If part of your home purchase could potentially be financed through an existing mortgage carrying a substantially lower rate, that can change the numbers.

But that doesn't automatically make an assumable mortgage the best choice.

You still need to consider things such as the remaining loan balance, seller equity, qualification requirements, additional financing needs, closing costs, timing and the overall purchase price.

That's why I look at this as another option worth knowing about, not a shortcut or magic mortgage trick.

Sellers, This Matters to You Too

This is the part I don't want Southeast Michigan homeowners to overlook.

If you're thinking about selling and you're sitting on an extremely low mortgage rate, don't automatically assume that mortgage has nothing to do with your sale.

First, find out what type of mortgage you have.

Then find out whether it may be assumable.

For the right qualified buyer, an assumable low-rate mortgage could be an attractive feature of the property.

That doesn't mean every buyer will be able to use it or that it will make sense in every transaction.

But it's certainly worth knowing what you have before making decisions about selling.

What About Downsizing?

This is where this topic connects with many of the homeowners I work with throughout Brownstown Township, Downriver and Southeast Michigan.

Maybe you've owned your home for years and have a very low interest rate.

Now the kids are gone, you're tired of maintaining the house, or the home simply doesn't fit your life anymore.

I've heard homeowners say:

“I'd move, but I'm never giving up my 3% mortgage.”

I understand why that rate feels valuable.

But your mortgage rate is only one piece of the decision.

How much equity do you have?

What would your current home likely sell for?

What would you purchase next?

Could you downsize enough to reduce or eliminate a mortgage?

What are you spending to maintain the home you're in now?

And could the existing financing on your home have any relevance to a potential buyer?

Those are much better questions than automatically deciding you have to stay because of your interest rate.

Before You Buy or Sell, Ask One More Question

Real estate decisions are rarely as simple as they first appear.

That's why I want buyers and sellers to get comfortable asking:

“What options am I missing?”

If you're buying a home, don't assume a brand-new mortgage is the only financing scenario worth investigating.

If you're selling, don't assume your existing mortgage is irrelevant to the conversation.

And if you're a homeowner in Brownstown Township, Downriver, or Southeast Michigan who's feeling stuck because your current home no longer fits but you're afraid to give up that low mortgage rate, let's look at the whole picture before you decide.

I'm Deborah Lee Darling with Find a Darling Home, The Clarity Coach for Stuck Homeowners in Southeast Michigan.

My job isn't to be your lender. It's to help you understand the real estate choices in front of you, ask better questions, and bring in the right professionals when we need them.

From Stuck to Sure™ with clarity, confidence, and care.

Mortgage assumption eligibility, loan terms, qualification requirements, costs and approval vary by loan and servicer. Buyers and sellers should verify a specific mortgage with the loan servicer and an appropriate mortgage professional.