Assumable loan vs. a new loan

Some existing loans can be taken over by a buyer, keeping the seller's original rate. The buyer then has to cover the gap between the price and the loan balance, with cash or a second loan. Enter the seller's loan and a new-loan alternative to compare monthly payment and cash needed.*

Home price ($) The price you would pay for the home. Use the listing price or the price in your offer. Seller's current loan balance ($) What the seller still owes on the loan the buyer would take over. The seller's mortgage statement shows this. Seller's loan rate (%) The interest rate on the seller's existing loan. This is the rate the buyer would keep if the assumption is approved. Years left on the seller's loan How many years are left on the seller's loan. Second loan to cover part of the gap ($) Enter a figure only if the buyer would borrow part of the gap. Leave at 0 to cover the whole gap with cash. Second loan rate (%) The interest rate on the second loan, if you use one. Second loans often cost more than a first loan. Second loan term (years) How many years the second loan would last. Rate on a new loan today (%) The interest rate you could get on a brand-new loan today, for comparison. New loan term The length of the new loan used for comparison. Down payment on the new loan (%) The part of the price you would pay in cash at closing on a new loan. 5 means 5%. Years you expect to keep the loan How many years you expect to keep the loan. The interest comparison runs for this many years.

The note under each box says what to enter and where to find it.

* The numbers already filled in are examples. They are not current rates or an offer. Replace them with your own.

How to read these numbers

Cash needed to cover the gap: the price minus the seller's loan balance, less any second loan. This is the money the buyer brings, beyond closing costs, to take over the loan.
Monthly payment, assumed vs. new: a low existing rate usually means a lower payment, so compare it with the new-loan payment at today's rate.
Interest paid in the years you expect to stay: the total interest each option would charge over that time. The assumed loan often costs less here, but it only helps if the buyer can cover the gap.
The trade-off: an assumed loan usually means a lower payment and more cash up front. A new loan usually means less cash up front and a higher payment. Which one fits depends on the cash on hand and how long the buyer plans to stay.
A second loan lowers the cash needed but adds its own payment, which is often at a higher rate. Look at the total monthly payment of the assumed loan and the second loan together.