Home prices were already high when Ellen Harper, a software architect living in Atlanta, started searching for a house in 2021. But she couldn’t have anticipated the quick surge in interest rates the following year, and even with a large down payment, the new math made her uneasy.

Earlier this year, however, she stumbled upon what felt like a portal to the not-so-distant past: listings of thousands of homes that come with a low-rate mortgage, which can be transferred from the existing homeowner to a new homebuyer, known as an assumable mortgage.

Harper, who is in her 50s, managed to snag one of these homes, closing two weeks ago on a four-bedroom brick colonial in Fairburn, Georgia, with a US$1,400 monthly payment. It’s an amount she’ll be able to comfortably afford into retirement, thanks in large part to a 2.49 per cent mortgage rate. That’s less than half the current rate of 7.09 per cent on 30-year-fixed loans, the most popular type of mortgage.

“I didn’t want to get a bad mortgage and be in a ball-and-chain situation where all I would be able to do is pay the mortgage,” Harper said. She found her home through Roam, a startup that went live in September that lists homes with assumable low-rate loans and assists buyers through the process. “There were other homes; they were nice and everything,” she added, “but I went for the lowest rate I could find.”

Assuming a mortgage isn’t some type of gimmick; it’s a built-in benefit on certain government-backed mortgages, as long as the new owners qualify. The process won’t work for all would-be buyers because there are several hurdles they may need to clear before they can claim the keys, often including a hefty down payment. For home sellers, it can be advertised alongside marble countertops, to attract more potential buyers.

Last popular in the 1980s, when mortgage rates topped 18 per cent, many real estate professionals are unaware that assumable mortgages are even possible. But as mortgage rates continue to rise, word is spreading. Realtor.com, a home listing website, recently started tagging assumable properties and making them searchable. And more companies – from small, bootstrap operations to startups like Roam – are seizing the opportunity, compiling lists or maps of eligible properties and charging homeowners a fee to help navigate what can be a nerve-wracking assumption process.

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An estimated 12.2 million loans, or 23 per cent of active mortgages, are assumable, according to Intercontinental Exchange, a data and technology firm, though most conventional mortgages (which account for the majority of existing loans) are not. It’s an embedded feature in mortgages backed by the Federal Housing Administration (FHA), which are widely used among first-time homebuyers, as well as those from the Department of Veterans Affairs (VA).

The number of assumptions completed is just a fraction of all home sales, but it’s growing. There were more than 6,000 completed in 2023, up 139 per cent from 2022. This year, there were already 3,896 assumptions completed.

Many homeowners with low-rate loans probably aren’t quite ready to give them up: Nearly two-thirds of assumable mortgages with rates below 4 per cent were taken out within the last 3 1/2 years, according to Black Knight.

Several stars need to align when attempting to assume a mortgage. Since many homes have rapidly appreciated in price, and the assumed loans are partially paid down, there may be a significant gap between the purchase price and the remaining mortgage. That means potential homebuyers may need hefty down payments, or at least be able to qualify for a second mortgage, which will be at a much higher rate.

Another hurdle is finding a seller willing to entertain such an offer, and hoping the mortgage servicer holding the loan – who is paid much less than for a typical new mortgage – will process the assumption in a timely manner.

Several new companies are attempting to smooth the process, including Roam, which recently received US$3 million in an investment led by the venture capital firm Founders Fund, and Tony Xu, CEO of DoorDash, among others.

Roam runs a website similar to Zillow’s, except all of the listings, currently in 18 cities across seven states, have assumable mortgages under 6 per cent and are large enough to cover at least half of the purchase price.

The company has partnered with real estate agents who are knowledgeable about assumable loans in the markets where it operates. Its transaction coordinators will call the mortgage servicer – the firm that manages the loan – until the deal gets done. Roam’s help doesn’t come cheap: It charges 1 per cent of the home sales price – for example, US$4,500 on a US$450,000 home. Buyers pay only if the deal closes.

In Harper’s case, her broker submitted her offer five different times because the seller and his listing agent were quite skeptical. That’s when her real estate agent, Kevin Hosner with Chapman Hall Realtors in Atlanta, got creative. They promised to pay the seller US$2,000 more if they didn’t close within 60 days. Roam used that as inspiration for a new guarantee: If the assumption isn’t processed within 45 days, the company will pay the homeowner’s mortgage on a prorated basis until it does. Harper ultimately paid US$357,000, with a down payment of roughly US$170,000.

“Just because it is assumable, technically, it doesn’t necessarily mean the seller is as willing to do it,” Hosner said. “It isn’t as quick as a cash offer that will close in two weeks.”

Both the FHA and VA have caps in place on how much mortgage servicers can charge for assumptions.

For buyers, seeking out low-rate mortgages may seem like a no-brainer. But there’s a lot to consider, including the prospect of qualifying for a second mortgage, something that could potentially gum up the closing process or kill the deal altogether.

Raunaq Singh, the CEO of Roam, said the uncertainty of securing a second loan was a frequent stumbling block; some mortgage servicers who held the assumable loan would extend additional credit, but not always. To address the issue, Roam recently started working with Spring EQ, a national lender, that will provide second loans to Roam customers with credit scores of at least 640 and down payments of at least 15 per cent. “Now they can shop for any home and not worry,” Singh added.

Imagine a home that cost US$400,000, which comes with an assumable mortgage of US$280,000. The homebuyer would need to come up with US$120,000 to close the gap, either with cash or loans. A buyer who puts 20 per cent down, or US$80,000, still needs another US$40,000, plus closing costs.

Here’s how the math shakes out: The homebuyer’s total monthly payment would be US$1,761, compared with US$2,237 monthly for a new mortgage with a 7.5 per cent rate. That includes the assumable mortgage payment of US$1,230 (with a 3 per cent rate) and a second loan, of US$336 (with a 9.5 per cent), according to Roam’s calculations.

There’s another ongoing cost included in the monthly payment: On FHA loans, the homebuyer would also need to pay a mortgage insurance premium of US$194, which is an FHA programme fee to cover the lender’s losses if the borrower defaults.

Mortgage insurance usually covers the risks associated with a low down payment. But here, even borrowers putting lots of money down will still need to pay the fee – most likely 0.80 per cent of the loan balance each year, which is divvied up and paid monthly – for the life of the loan, though there are exceptions.

People assuming VA loans must pay a one-time fee of 0.50 per cent of the loan amount to the agency, but there aren’t any ongoing insurance costs. There are other limitations, however. If a buyer who isn’t a veteran assumes the mortgage, the seller could lose all or part of his or her entitlement to another VA loan until the old one is paid off.

Still, for many would-be buyers, it’s worth it.

Ryan Carrillo was one of many homeowners who wanted to move but didn’t want to surrender his 2.75 per cent mortgage.

Once he learned his FHA-insured mortgage was assumable, he figured he could try to find another one. But he quickly became frustrated trying to find assumable listings.

“I thought to myself, ‘We’re in a world now where the underlying mortgage is more valuable than the real property; surely there has to be a way to do something with that,’” he said.

That led to an idea that he shared in a text to an entrepreneurial friend, Louis Ortiz. In August, the two unveiled Assumable.io, a small homegrown operation. It now includes a website with 26,000 active listings and charges US$1,850 to help aspiring borrowers through the process that Carrillo is about to embark on for his own family. He and his wife, who had their first child in January, are moving from Phoenix to Texas to be closer to relatives.

“Assumables are a time machine to the low rates of the past,” he added. “As I ran the numbers,” he added, “it was a no-brainer.” NYTIMES