Bring up assumable mortgages to most real estate professionals, and you may get a blank look. In truth when you hear the basics, it sounds too good to be true. Assumable mortgages give homebuyers the option to secure a mortgage with a below-market interest rate. Instead of settling for over 6% on a new mortgage, select buyers could qualify for the rate that the home seller has on their mortgage. That’s why they’re called assumable mortgages. The buyer replaces the seller on their mortgage when the property is purchased.

Before you get too excited about assumable mortgages, you should know there are many hoops to jump through to secure one. It falls into the category of getting two free round-trip tickets to Europe with a credit card signing bonus. Yes, it can be done, but it takes hard work and more than a little luck.

First, buyers need to look for a property that has an assumable mortgage attached to it. Most of these are FHA, VA or USDA loans and make up about 23% of active mortgages. These may be rarer in higher-income communities as FHA loans can be popular with first-time home buyers.

I wish it were easier to find homes available with an assumable loan. A recent search on Redfin for Boulder County homes for sale with the word “assumable” in the listing yielded only seven hits. This is likely a small fraction of assumable loans on properties for sale. Resources such as withroam.com and assumable.io offer information on assumable mortgage properties that are not publicly advertised as such. Your real estate agent or title company may have resources for searching for assumable loans even if the properties are not marketed that way.

Your job is not done once you find a property with an assumable mortgage. When you assume a mortgage, you also take on the loan balance that the seller has. As the seller has been paying on the mortgage and the property may have appreciated since they purchased it, the mortgage may be significantly lower than the home’s current value. Imagine a home purchased in 2020 for $400,000 with a $20,000 down payment and a 3% interest mortgage. Since then, the house has appreciated to $500,000 and the loan has been paid down by $34,000. This means the buyer would have to come up with a $154,000 down payment or arrange for a second mortgage at a (higher) market rate.

Also, sellers may be reluctant to accept the longer closing times that can accompany loan assumptions. While FHA loans appear to have shorter assumption periods, there are reports that VA loans can take longer. All this complexity is why companies such as withroam.com have sprung up. They help you find a property with an assumable loan (working with your local agent) and then aid the loan assumption process. They charge 1% of the purchase price of the home for this service, so do-it-yourselfers may want to look elsewhere.

From a seller’s perspective, if you do have an FHA, VA or USDA mortgage on your home with a low interest rate, consider marketing your property as having an assumable loan. Your agent may be unfamiliar with these loans or reluctant to accept an offer with a loan assumption given there may be delays in closing. Still, it could help your property stand out and allow more people to qualify to purchase your home. That could be a vital edge in today’s real estate market with more plentiful inventory.

This is not an area of personal finance that is easy to master. But for the right buyer and property, it could mean savings of many tens of thousands in interest payments over the next few years. For the right seller, it could help move your property faster or at a better price.

David Gardner is a certified financial planner and is admitted to practice before the IRS. He recently retired from Mercer Advisors and continues to write about financial topics. As financial planning is only possible after knowing the client, the column is not intended to be personal financial or tax advice. Data presented is believed to be accurate at the time of writing.