How to Cover the Equity Gap When Assuming a Mortgage

Understanding the Equity Gap in Today’s Housing Market

Modern homebuyers often face a significant challenge: not having enough cash on hand to cover the equity gap. As home prices continue to rise, many sellers have accumulated substantial equity in their properties. This means the required down payment when assuming a mortgage can be much higher compared to traditional mortgage loans. If you’re searching for a low-rate loan, you may find that the seller’s equity has grown considerably since they first applied for their mortgage.

What Is an Equity Gap?

The equity gap is the difference between a home’s sale price and the current remaining balance of the seller’s mortgage loan. When you assume a mortgage, you take over payments on the existing loan balance, but you must also pay the seller their accumulated equity—usually as a lump sum at closing.

• For example: If a home is selling for $400,000 and the remaining mortgage balance is $300,000, you would need $100,000 as your down payment to bridge the equity gap.

What Can You Do If You Don’t Have Enough for the Down Payment?

If you don’t have enough funds to cover the seller’s equity, there are several strategies you can consider:

1. Alternate Financing Options

• Second mortgages or home equity loans can be used to finance the equity gap.

2. Personal Loans or Gift Funds

• Family gifts or unsecured personal loans are sometimes used to help cover the gap, but keep in mind this can affect your overall affordability and loan eligibility.

3. Down Payment Assistance Programs

• Many assistance programs target first-time buyers, but regional programs are also available for others. These can help with securing funds for your down payment.

How Assumable Helps Buyers Bridge the Equity Gap

At Assumable, we recognize that assembling a large down payment can be difficult, especially in today’s market where equity gaps are substantial. That’s why we actively partner with industry-leading vendors to develop innovative solutions that help buyers cover their required down payment when pursuing an assumable mortgage.

Our mission is to make homeownership more affordable and to make lower mortgage payments easily accessible for Americans. We are soon launching new partnerships and programs specifically designed to ease down payment barriers and support buyers in reaching their homeownership goals.

Take the First Step Toward an Assumable Mortgage

So, what can you do next?

• Start your search and estimate your down payment needs. Use our platform to browse available homes and calculate the expected down payment for listings that interest you.
• If you’re motivated to pursue an assumable mortgage but are concerned about your down payment, help is on the horizon.

Assumable is working to make the process easier and more affordable for all buyers. Try out the app to discover the best assumable mortgage properties in your area.

Our average customer saves $1,013 per month on their mortgage payment and $323,000 in interest over the life of their loan.