Buying an assumable mortgage can feel impossible right now. But what if I told you there’s a way to snag a dreamy 2.5% mortgage rate and it would only require 5% down? That’s where assumable loans come in.
Myth-Busting Assumable Loan Equity Gaps
One of the biggest misconceptions about assumable loans is that they come with daunting equity gaps. People imagine scenarios where they’ll need to cough up $100,000 or more to cover the difference between the purchase price and the loan balance. Sometimes that’s true, but more often than not, the equity gaps are manageable—often under $30,000.
Of course, every now and then, you’ll stumble across a property with an equity gap bigger than your student loans. But even in those cases, there’s a way to make it work—and for a lot less out-of-pocket than you might think.
The 5% Down Solution
Here’s the game changer: I’ve teamed up with a lender who’ll cover up to 95% of the purchase price with a second loan. That means you only need to bring 5% of the purchase price to the table—regardless of how large the equity gap is.
Let’s break it down with an example:
Example: $500,000 Purchase Price
- Current Loan Balance: $400,000 at a glorious 2.5% interest rate
- Equity Gap: $100,000 (Purchase Price – Loan Balance)
Without our 95% solution, you’d need $100,000 in cash to cover the equity gap—ouch. But with our lender’s program you only need $25,000:
- Second Loan Amount: $75,000 (95% of the $500,000 purchase price minus the original loan balance)
- Down Payment: $25,000 (5% of the $500,000 purchase price)
Monthly Payment Breakdown
1. Original Loan (you are assuming):
- $450,000 at 2.5% interest
- Approximate Monthly Payment: $2,153 (including principal and interest)
2. Second Loan (called a HELOC “piggyback” Loan):
- $75,000 at 8% interest (rate = prime rate + 0.25%)
- Approximate Monthly Payment: $630
Total Monthly Payment: $2,783
Compare that to what you’d pay on a new $500,000 loan at today’s 6.5% interest rate (spoiler alert: it’s closer to $3,377), and you’re looking at significant monthly savings. Adding up to about $7,200/year.
Why Assumable Loans Make Sense Right Now
With this strategy, you can buy a primary residence with a fantastic monthly payment and a tiny down payment. You’re essentially reaching back in time to grab those rock-bottom rates everyone was bragging about two years ago. Sure, your second loan will have a higher interest rate, but it’s on a much smaller amount—and your overall savings more than make up for it.
Ready to Dive In?
If this sounds like a smart move (spoiler: it is), head over to TheAssumableGuy.com to check out more properties with assumable mortgages. And if you’d like me to introduce you to our lender, let me know. I’d be thrilled to help you take advantage of this amazing opportunity—and save you from today’s less-than-ideal rates.
Don’t let these low rates stay in the past. Let’s bring them back into your future home.