How to use this calculator
- Enter the price and the assumable loan's balance, rate and remaining years.
- Enter the cash you will bring. It goes first toward the seller's equity.
- Enter the rate and term for a second loan or seller note covering any remaining gap.
- Enter today's rate for a conventional new loan with the same cash down.
- Compare monthly payments, blended rate and interest over the first 5 years.
Worked example
A $400,000.00 home has a $280,000.00 assumable loan at 3%. The equity gap is $120,000.00. You bring $60,000.00, leaving a second loan of $60,000.00 at 9%. Total payment is $1,867.63, a blended rate of 4.06%, compared with $2,262.03 for a new loan at 7%. That is $394.40 a month in favour of assuming. Five-year interest is $64,697.20 versus $115,769.11.
These are the default inputs above, so you can follow along.
The formula
Equity gap = price − assumable balance. Second loan = gap − your cash (minimum $0). Payments use M = P × r / (1 − (1 + r)−n). Blended rate = (balance × rate₁ + second × rate₂) ÷ (balance + second). New-loan comparison: price − your cash at the market rate. Five-year interest sums the interest portion of the first 60 payments of each loan.
Frequently asked questions
Which mortgages are assumable?
In the U.S., FHA, VA and USDA loans are generally assumable with lender approval. Most conventional loans have due-on-sale clauses and are not.
Do I need to qualify to assume a loan?
Usually yes. The servicer reviews credit and income much like a new loan, and there may be an assumption fee.
How is the seller's equity paid?
With your cash, a second mortgage if a lender allows it, or a seller carryback note. This calculator lets you model any of these as the "second loan".
What about a VA loan entitlement?
If a non-veteran assumes a VA loan, the seller's entitlement may stay tied to the loan. Sellers should understand this before agreeing.
Is assuming always cheaper?
Not always. A large equity gap financed at a high second-loan rate can erase the benefit. Compare the blended rate and the 5-year interest.