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3 Drawbacks of Assumable Loans


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TERMINOLOGY

Though assumable loans have a number of advantages over new loans, there are a few disadvantages to them as well. Before jumping into an assumable loan, it is important to recognize these three drawbacks.

Due Date

The due date of the loan isn't going to change. If the payment is due on the 12th and you assume the loan on the 9th, you have three days (not factoring in any grace period, if one is available) to make the full payment on the loan. New loans generally allow 45 days before the first payment is due because of the down payment.

Interest Rate

The interest rate isn't going to change, which means it could be much higher than the current market interest rates. This means that you could pay more money than if you had a brand new loan.

Credit Based

To be able to assume a loan, your credit and income must be reviewed. You may have trouble getting a bank to allow you to assume a loan. It is generally easier than qualifying for a new loan, but may still be difficult for many borrowers with bad credit.