One of the biggest advantages of an assumable mortgage is the potential savings — but how do you actually calculate them? This guide breaks down the math so you can evaluate any assumable listing and understand exactly what you'd save.
The three numbers that matter
Every assumable mortgage calculation comes down to three key figures:
- The assumed rate — the seller's existing interest rate that you'll inherit
- The current market rate — what you'd pay on a new mortgage today
- The remaining loan balance — how much of the original loan is left
Monthly payment savings
The simplest way to understand savings is comparing monthly payments. For a $400,000 loan balance:
- At 3.0% (assumed): ~$1,686/month (25 years remaining)
- At 7.0% (new mortgage): ~$2,661/month (30-year term)
- Monthly savings: ~$975
That's $11,700 per year you keep in your pocket — money that compounds over time through savings, investments, or simply a better quality of life.
Total interest savings
Monthly savings are just the beginning. Because you're paying a lower rate on the entire remaining balance, the total interest paid over the life of the loan drops dramatically:
- Total interest at 3.0% (25 years): ~$105,800
- Total interest at 7.0% (30 years): ~$558,000
- Total savings: ~$452,200
Even accounting for the fact that the assumed loan has fewer years remaining (which means less time for interest to accumulate), the savings are substantial because the rate difference is so large.
Understanding the equity gap
The equity gap is the "cost" of accessing these savings. It's the difference between the home's sale price and the remaining loan balance:
- Home price: $500,000
- Remaining balance: $400,000
- Equity gap: $100,000
Think of it like a traditional down payment — you're putting cash into the deal. The difference is that your "down payment" buys you a rate that's 3–4 percentage points lower than the market.
When a second mortgage makes sense
If you don't have enough cash to cover the full equity gap, a second mortgage can help. The key insight: even with a second loan at today's rates, your blended rate is still lower than a single new mortgage.
Example:
- Assumed loan: $400,000 at 3.0%
- Second mortgage: $50,000 at 8.0%
- Blended rate: ~3.6% (weighted average)
- Still far below the 7.0% you'd pay on a $450,000 new mortgage
Fees and closing costs
Assumption costs are typically much lower than a new mortgage:
- FHA assumption fee: Up to $1,800
- VA funding fee: 0.5% of remaining balance
- Title insurance: Standard (similar to a regular purchase)
- Attorney/escrow fees: Standard (similar to a regular purchase)
Compare this to origination fees on a new mortgage (typically 0.5–1% of the loan amount, plus appraisal, underwriting, and other fees that can add up to 2–5% of the loan).
A quick formula
To estimate your monthly savings on any assumable listing:
- Find the listing's monthly payment (shown on every Passage listing)
- Calculate what a new mortgage would cost: multiply the remaining balance by (current rate / 12) as a rough estimate, or use any mortgage calculator
- Subtract: new payment minus assumed payment = your monthly savings
Try it yourself
Every listing on Passage includes an equity calculator that models your savings automatically. Enter your available cash, and the calculator shows your monthly payment, total interest saved, and whether you'd need a second loan.
Browse listings and run the numbers — the savings might surprise you.