Loan Assumption

Loan assumption is the process where a property buyer takes over the seller's existing mortgage rather than obtaining new financing, keeping the original loan terms including interest rate, remaining balance, and maturity date. In the current high-rate environment, loan assumptions have become extremely valuable because buyers can inherit below-market interest rates locked in during 2020-2021. A buyer assuming a 3.5% loan versus originating a new loan at 6.5% can save hundreds of thousands in interest costs. CMBS and agency loans are generally assumable (with lender approval and a 1% assumption fee), while bank loans often are not. The assumption process involves the new borrower qualifying with the existing lender, which typically takes 60-90 days. For NNN investors, assumable financing at favorable rates can significantly enhance returns and may justify paying a premium purchase price.