Before You Pay Off That 3.25% Mortgage

That wonderfully low mortgage rate you locked in a few years ago may have more value than you realize — even when you sell your home.

I recently came across an excellent discussion inNREB Premium Briefing #7, “The Seller’s 3.25% Loan Doesn’t Have to Die at Closing.”It caught my attention because this is something I think both buyers and sellers should know about.

When most of us think about selling a home, we assume the process works like this: the buyer obtains a brand-new mortgage, the seller’s existing mortgage gets paid off at closing, and everybody moves on.

Usually, that’s exactly what happens.

But not always.

If the seller has certain FHA or VA financing, that old mortgage may potentially beassumableby a qualified buyer.

And when that mortgage carries one of those wonderful 2%, 3% or 4% interest rates from a few years ago, it is certainly worth asking about before automatically paying it off.

Why this matters so much today

Mortgage rates reached extraordinary lows during the pandemic years. Freddie Mac reports that the average 30-year mortgage actually reached a historic low of2.65% in January 2021.(Freddie Mac⁠)

Compare that with today.

As of August 13, 2026, Freddie Mac’s national average for a 30-year fixed-rate mortgage was6.67%.Actual rates vary by borrower, lender, loan type, credit profile and other factors, of course. (Freddie Mac⁠)

That difference can translate into serious money every month.

Here’s an example

Suppose a Southern Arizona home is selling for$450,000.

The seller has an FHA mortgage originated during the low-rate years with approximately:

$320,000 remaining at 3.25%, with about 24½ years remaining.

A buyer using traditional financing and putting 10% down would need to finance approximately$405,000.

At 6.67%, the principal-and-interest payment on a new 30-year $405,000 mortgage would be approximately$2,605 per month.

Now suppose the qualified buyer could assume that seller’s $320,000 mortgage at 3.25%.

The principal-and-interest payment on the assumed loan would be approximately$1,580 per month.

That’s a difference of roughly$1,025 every monthbefore considering the rest of the transaction.

That’s when I start paying attention!

Of course, this is an illustration — not a loan quote — and it doesn’t include taxes, homeowners insurance, mortgage insurance, HOA costs, closing costs or other financing expenses.

But it demonstrates why an assumable mortgage can be worth investigating.

There’s a catch: the seller still needs their equity

Here’s the part that sometimes gets overlooked.

If the home sells for $450,000 and the mortgage being assumed is only $320,000, there is a$130,000 difference.

The seller isn’t giving away that equity.

The buyer has to cover the difference through available cash and, when permitted and approved, potentially other financing.

For example, if our buyer planned to bring $45,000 to the transaction, another $85,000 would still have to be addressed.

That’s why I would never tell someone,“Just assume the mortgage and you’ll save $1,000 a month.”

We have to look at theentire financing structure.

An inexpensive first mortgage combined with an expensive second mortgage may still make sense — or it may not. That’s a calculation the buyer should make with a knowledgeable lender before making a decision.

FHA and VA loans deserve a second look

HUD confirms that FHA-insured single-family forward mortgages are assumable, subject to the applicable FHA requirements and servicer process. (HUD Answers⁠)

VA loans have an especially interesting feature.

The Department of Veterans Affairs explains thatany qualified buyer — including someone who is not a veteran — may assume a VA loan, subject to approval. (Benefits⁠)

But I want to put a big star next to this one.

Veteran sellers need to be especially careful.

If a non-veteran assumes a veteran’s VA mortgage, the original veteran’sVA loan entitlement can remain tied to that mortgage. If another eligible veteran assumes the loan and substitutes sufficient VA entitlement, the seller’s entitlement may instead be restored. (Benefits⁠)

That means I would want a veteran seller to understand bothrelease of liability and VA entitlementbefore agreeing to an assumption.

This isn’t an area for guessing.

What about borrowing money to cover the equity difference?

This was another part of the NREB briefing that interested me.

The VA specifically recognizes that a buyer assuming a VA loan may also use qualifyingsecondary financing. The additional loan generally must remain subordinate to the VA mortgage, must be properly documented and must be considered in the buyer’s underwriting. (Benefits⁠)

In other words, the equity gap doesn’t automatically kill an assumption.

But it does mean everyone needs to structure the transaction correctly from the beginning.

And no — this doesn’t mean every mortgage can be transferred

That’s an important distinction.

Most conventional mortgages aren’t freely assumable by an unrelated buyer. Freddie Mac specifically notes that most conventional mortgages, including Freddie Mac mortgages, do not permit ordinary third-party assumptions except in limited circumstances. (My Home⁠)

So I’m not suggesting that every seller suddenly advertise their mortgage rate.

I’m suggesting something much simpler:

Ask the question.

If I’m listing a home whose owner purchased or refinanced during the historically low-rate years, and especially if I discover an FHA or VA loan, I think it’s worth investigating before that mortgage automatically disappears at closing.

Martha’s Take

To me, this is another example of why today’s real estate market requires more than simply putting a home in the MLS or opening doors for buyers.

Sometimes there is value hiding in the financing.

A 3.25% mortgage attached to the right property might make that home considerably more attractive to the right qualified buyer — particularly when new mortgage rates are substantially higher.

It won’t work for every seller.

It won’t work for every buyer.

And an assumption still requires qualification, approval and careful coordination with the loan servicer, lender and closing professionals.

But when the numbers work?

That old mortgage may be one of the most valuable features of the house.

So before automatically paying it off at closing, I think there’s one very smart question to ask:

“Is this loan assumable — and would assuming it benefit this buyer and seller?”

That’s a conversation worth having.

Martha Viera Parsons
MVP Realty Team | HomeSmart Advantage Group
You’ll Be an MVP with Me.