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The Hottest Thing in Real Estate Is a Loan From Two Years Ago

Real estate agents are pushing sub-3 percent mortgages as an amenity, just like marble countertops or a view of the mountains.

Experts caution that mortgage transfers from seller to buyer can come with risks. Credit…Sophie Park for The New York Times

June 10, 2023

The only goal was to not lose money.

When Matthew Kilboy listed the Washington, D.C., condominium that he and his husband had bought in 2017, they accepted that higher interest rates and a soft market for condos meant any dollar over the $529,000 they had paid was a dollar they would thank their lucky stars for.

A similar two-bedroom and two-bath unit in the building had recently gone for just under half a million. The $549,000 price they listed in April was basically a wish.

A month later, the couple closed at $565,000 — thanks to a little-known amenity that has become increasingly popular as mortgage rates have risen. Their unit came with an assumable 30-year mortgage, with a 2.25 percent fixed rate that the couple had locked in after a November 2020 refinancing. By advertising that the buyer could inherit the mortgage, the couple, who have moved to Denver, got several over-asking-price bids that seemed like a relic from the warped real estate market during the Covid lockdown.

“It was the very first sentence of the listing,” said Mr. Kilboy, 39, a former Navy nurse whose loan, backed by the Department of Veterans Affairs, could be passed to the buyer. “No one could find an interest rate that low, so we were really pushing it.”

resumed their ascent, despite a huge increase in borrowing costs. The refrain among real estate agents and economists is that anyone who secured a mortgage rate of 3 percent or lower owns a valuable asset that they are loath to give up.

But every asset has a price. And now an emerging cadre of investors and real estate agents are trying to, in effect, sell mortgage rates from several years ago by transferring them to new buyers.

Redfin, the real estate brokerage, has seen a steep rise in listings like Mr. Kilboy’s that have comments like “beautiful home with assumable loan at 3.25 percent.” Facebook groups have popped up to find buyers for them, while new companies are pitching services to speed up the transfer.

Assumption Solutions, a consulting firm that, for a $1,100-per-deal processing fee, helps real estate agents navigate transferring mortgages between sellers and buyers. In his pitch to agents, Mr. O’Boyle argues that they push sub-3 percent rates as they do marble countertops or a view of the mountains.

“You market this, and let’s say you’re competing against the house next door, your house should sell either faster or for more money,” he said.

2/1 buydown,” in which a borrower pays for an interest rate reduction of two percentage points during the first year and one percentage point in the second.

Put simply: “Most homes are unaffordable at today’s rates,” said Luis Solis, a real estate agent in Phoenix and Portland, Ore.

A majority of Mr. Solis’s recent deals have had some form of interest rate compensation that is a price cut in all but name, he said. Usually it’s a lump sum at closing that buyers use to buy temporarily lower rates. Sellers with a lot of equity can cut out the middleman and finance the buyer’s purchase below prevailing rates by acting as a lender — seller financing, it’s called.

Assuming mortgages, paying down rates: These are creative but straightforward solutions to rising borrowing costs. But on the margins, a rising number of investors looking to buy homes with minimal cash are trying a gray technique of finance — known as “Subject to” or “Subto” — in which they try to find people who have fallen behind on their debts and make a side agreement to take over their (low-interest) payments. (The deal is said to be “subject to” an existing loan.)

@ConorDougherty