Assumable Mortgage Closing Costs: What to Expect

One of the underrated benefits of assumable mortgages: the closing costs are significantly lower than a new mortgage. Let me walk through exactly what you'll pay and what you'll skip.

What You Pay

Assumption fee: The loan servicer charges a fee to process the assumption.

• FHA loans: approximately $1,800
• VA loans: approximately $300-$500
• USDA loans: varies, typically $500-$1,000

Assumption processor fee: If you're working with UMe, they charge 1% of the purchase price. On a $400,000 home, that's $4,000. Roam has a similar fee structure.

Title insurance: Standard for any real estate transaction. Costs vary by state and purchase price, but expect $1,500-$3,000 in Colorado.

Recording fees: County charges to record the deed transfer. Usually $50-$200.

Prorated taxes and HOA: Standard prorations that apply to any home purchase.

Attorney fees (if applicable): Some transactions require an attorney. Colorado doesn't require one, but it's an option.

What You Skip

Here's where the savings add up:

No loan origination fee. On a new mortgage, this is typically 0.5-1% of the loan amount. On a $400K loan, that's $2,000-$4,000 saved.

No appraisal (in many cases). New mortgages require an appraisal ($500-$700). Many servicers waive the appraisal for assumptions.

No discount points. Buyers often pay points to buy down their rate on new mortgages. With an assumption, the rate is already locked in.

No application fee. Many lenders charge $300-$500 just to apply for a new mortgage.

No underwriting fee. Another $500-$800 you skip.

No mortgage insurance setup (VA loans). FHA loans carry over existing MIP, but VA loans have no mortgage insurance at all.

Total Cost Comparison

Typical assumption closing costs on a $400K home:

• Assumption fee: $1,800
• Processor fee (1%): $4,000
• Title insurance: $2,000
• Recording and misc: $500
• **Total: approximately $8,300**

Typical new mortgage closing costs on a $400K home:

• Origination fee (1%): $4,000
• Appraisal: $600
• Application/underwriting: $1,000
• Title insurance: $2,000
• Recording and misc: $500
• Discount points (optional): $0-$4,000
• **Total: approximately $8,100-$12,100**

The assumption saves you $0-$3,800 in closing costs depending on whether you'd pay points on a new mortgage. Not a massive difference, but every dollar counts.

But here's the real comparison: your monthly payment. The lower rate on the assumption saves you $800-$1,200 per month. Even if closing costs were identical, the monthly savings dwarf the closing cost difference.

The Equity Gap Is NOT a Closing Cost

I want to be clear about this because it confuses people. The equity gap (the cash you pay to cover the difference between purchase price and loan balance) is not a closing cost. It's your investment in the property. It's your equity from day one.

Think of it this way: on a traditional purchase with 20% down, your down payment isn't a "cost." It's your ownership stake. The equity gap works the same way.

Second Mortgage Closing Costs

If you're using a second mortgage to cover the equity gap, you'll have additional closing costs for that loan. These are typically:

• Origination fee: 1-2% of the second mortgage amount
• Appraisal: may be required
• Title search: usually minimal since you already have title insurance
• Total: roughly $2,000-$5,000 depending on the loan amount

Factor these in when calculating your total cash needed at closing.

Tax Deductibility

Mortgage interest on assumed loans is tax-deductible just like interest on a new mortgage. Points you pay on a second mortgage may also be deductible. Consult with a tax professional for your specific situation, but there are no tax disadvantages to an assumption versus a new loan.

Bottom Line

Closing costs on assumptions are lower, but the real savings are in the monthly payment. The closing cost advantage is a nice bonus, not the main reason to pursue an assumption. The main reason is saving $800-$1,200 every single month for the next 25 years.