I am buying a home that has an assumable mortgage. Is that a good thing?
Definitely a yes for the buyer if the interest rate on the existing mortgage is lower than the rate the buyer could obtain on a new mortgage, either because of prevailing market conditions or the buyer’s poor credit history. It is not necessarily a slum dunk though; check out also the possible assumption fee (usually one point) and other conditions of assumption set forth in the existing loan. Then sharpen your pencil, roll up your sleeves, and do the math to calculate whether or not to assume an old loan or apply for a brand new mortgage.
From the seller’s point of view, it may pay to be cautious about allowing a buyer to assume an existing mortgage on which you are personally liable. Depending on the state and terms of the mortgage, a seller may remain liable on the loan until it is paid off in full. So if the house is lost in a mud-slide or fire, the mortgage holder may come after both the new buyer and the old seller for any deficiency..
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