How to use the assumable mortgage benefit calculator
- Enter the purchase price, the balance, rate and months left of the loan you could take over, and the cash you will put in.
- Enter the rate and term of the second loan that covers any gap, and the rate and term of a new loan.
- Add the cost to assume and the costs of a new loan under the advanced options, and the months you expect to keep the home.
- Read which choice costs less, the monthly payments, and the side by side table of interest, costs and balance owed.
Formula
gap loan = price - assumed balance - cash
new loan = price - cash (the same cash is used in both choices)
payment = loan x r / (1 - (1 + r)^-n), with r the monthly rate and n the months, rounded to the cent
cost over the stay = interest paid in the months you keep the home + costs at the start
Both choices are run month by month with each month's interest rounded to the cent. Principal repaid is not a cost, so the balance still owed is listed separately.
A $450,000 home with an assumable loan at an example 3%
The loan to assume has a balance of $300,000 at 3% with 300 months left. You put in $80,000 of cash, so the gap is $70,000, borrowed at an example 8.5% over 120 months. A new loan of $370,000 at an example 6.75% runs 360 months.
Assuming costs $1,422.63 a month on the old loan and $867.90 on the gap loan, $2,290.53 in total, against $2,399.81 for the new loan. Over 60 months the interest is $41,874.45 + $24,376.48 for the first choice and $121,328.96 for the second. With $1,500 to assume and $9,000 of new loan costs, the totals are $67,750.93 and $130,328.96, so assuming costs $62,578.03 less. The balance owed after 60 months is $298,819.13 against $347,340.36.
Why the gap loan matters
When you take over a loan the seller still owns the difference between the price and the balance, and you have to pay it. Your cash covers part of it and a second loan, often at a higher rate, covers the rest. A cheap first loan can be less of a bargain when the second one is expensive, which is why this tool prices both together.
You can test the new loan side with the Mortgage Calculator and see how paying points changes it in the Mortgage Points Calculator. The Down Payment Calculator helps with the cash you need, and the Construction Loan Draw Interest Calculator covers a new build.
What decides whether you can assume a loan at all
Not every loan can be taken over, and the lender usually has to approve the buyer. Some loans must be repaid when the home is sold. Check the loan documents and ask the lender before you plan around the idea. This tool compares the costs once assumption is possible and does not tell you whether it is.
Assumptions and limits
- The loan is taken over on its current balance, rate and remaining term, with payments of equal size.
- The gap loan is a separate level-payment loan.
- Cash, price and months of ownership are the same in both choices. Taxes, insurance, mortgage insurance and moving costs are left out.
- All rates on this page are examples. Enter the rates in your own offers.
Frequently asked questions
Why is the same cash used in both choices?
It makes the comparison fair. With equal cash the new loan equals the assumed balance plus the gap loan, so the two choices finance the same amount.
What if I keep the home longer than the old loan lasts?
The old loan stops when it is paid off, and the tool stops charging payments on it at that point. The new loan keeps going, so a long stay favors whichever loan has the lower rate.
Is a lower monthly payment always better?
Not necessarily. A shorter gap loan has a higher payment but costs less in interest. The table lists interest, costs and the balance owed so you can weigh them yourself.
Can the new loan win?
Yes. If the old rate is not much below the new one and the gap loan is expensive, the headline switches to say that a new loan costs less, and by how much.