Finding value in loan assumptions

Mortgage insurance, length of ownership can reduce advantages

"Does the assumability option on FHA loans offset their high mortgage insurance premiums?"

That is a great question and very timely. The value of assumability right now is as high as it is ever likely to go because of the broad consensus that interest rates in future years will be higher than they are now.

Loans insured by the Federal Housing Administration (FHA) are assumable, while conventional loans, with a few exceptions, are not. That means that a home purchaser today who finances the purchase with an FHA-insured loan and who sells his house later when interest rates are higher will be able to offer a potential buyer the right to assume his low-rate FHA loan. After approval of the buyer by FHA, on sale of the property the buyer will assume all the obligations under the mortgage, just as if the loan had been made to her, and the seller will be relieved of liability.