Courtesy of Brian Sankey
- Brian Sankey, a retired military police officer, bought a Kentucky home with a 2.75% interest rate.
- The home had an assumable mortgage, which allows a buyer to take over a seller's existing rate.
- It was a win-win: sellers can list their home higher, and buyers enjoy much lower monthly payments.
This as-told-to essay is based on a conversation with Brian Sankey, 54, a retired military police officer, who bought a home in Kentucky with an assumable mortgage.
An assumable mortgage allows qualifying buyers to acquire the interest rate, current principal balance, and other conditions of a seller's existing loan. Not all loans can be assumed.
The essay has been edited for length and clarity.
My wife and I live in Elizabethtown, a small town just south of Fort Knox, Kentucky. We've been here for 15 years, which is the longest either of us has ever lived in one place, aside from childhood.
Having spent over 30 years in the army and moving frequently, you really get to know the real-estate market and the most ideal places to live.
Over the past five years, we bought a few homes in the area, but none seemed to suit us for our retirement.
The housing market here is quite competitive, and the area is growing. So after moving out of our last home, we decided to take a breather from house-hunting and wait for the real estate market to cool down.
This year, we rented a home when our landlady mentioned she was planning to appraise it, which concerned us that she might try to sell it before we were ready to move out.
At that point, my wife and I weren't actively searching for a home. However, we came across a four-bedroom, four-bathroom home that better accommodated our family than previous homes.
In June, we bought it for $400,000, assuming the seller's mortgage at a 2.75% interest rate with 26 years left on a 30-year fixed-rate loan.
Before finding this home, we thought the type of home where we could be happy with our children and grandchildren would be out of reach due to current interest rates.
But when the situation arose, it gave us a nudge. It felt like God was presenting an opportunity to us.
It was a 'win-win' situation for us and the home seller
I learned years ago about the assumption feature of VA mortgages, but had put it in the back of my mind.
However, I realized the home was near an army base and suspected the sellers might be military, so I asked them about a loan assumption.
They weren't inclined to at first because they felt the assumption process would take too long, and they were looking for a quicker sale. However, after about 30 days, they realized that cash buyers wouldn't be throwing money at them and agreed to proceed with the assumption.
Taryn Root/Olive + Oak eXp Realty The Still Group
Typically, when interest rates rise, the housing market slows down because fewer people can afford higher mortgage payments. Five years ago, with rates around 2.75%, more buyers could afford larger loans. Now, with rates at 7%, fewer buyers can qualify.
The benefit of a loan assumption for the seller was that it allowed them to sell their home at a higher price. For my wife and me, it allowed us to get a lower interest rate.
It was a win-win for both of us.
The assumable mortgage process was actually straightforward
Before starting the assumption, we thought it would be very difficult. But it turned out to be as fast as a normal purchase, and we were pleasantly surprised.
It's a very simplified process because you don't need another home inspection and are using the same lender. All you do is change the name on the contract.
To start the process, you have to get the seller to agree to it, and then you have to get the loan servicer to process it.
Brian Koellish / Shutterstock.com
Initially, we went to a lender who told us that assuming a loan was not very easy and that they were reluctant to do it. It seemed that they were trying to steer us away from the assumable mortgage and toward getting a new one. They even offered us a lower interest rate below the current rate, but it was still significantly higher than what I was getting through this assumable process.
I called Veterans United Home Loans, and they were happy to work with me. It turned out to be a very easy process. We completed the paperwork, they got the VA to approve it, and we closed.
From the time we first saw the home until the time we were able to close, it took about six weeks. It was very fast.
We'll have more money to enjoy retirement
I think most veterans aren't aware of assumable mortgages. They might have heard about it briefly, like I did, but it's easily forgotten.
I'm happy I remembered it because it made our home purchase more affordable. Despite the current market conditions and higher interest rates, my wife and I were able to purchase a larger home for a lower monthly payment.
Because our mortgage is smaller, we can retire more comfortably. I can now use the money I would have spent on higher-interest payments to cover living expenses. We will also have more discretionary income.
This home purchase was like God presenting an opportunity to us.
With 17 children and grandchildren and potential visits from other family members, like my brothers and their kids, we now have a larger house that can fit everyone.