If you've been researching assumable mortgages in Colorado, you've probably hit the same question eventually: what do I actually put down?
It's more complicated than a conventional mortgage, and the answer surprises most buyers. Here's what you need to know.
The Short Version
When you assume a mortgage, you don't put a "down payment" in the traditional sense. Instead, you pay the difference between the home's purchase price and the seller's remaining loan balance. That gap is called the equity gap, and it can range from almost nothing to $150,000+, depending on how long the seller has had the loan and how much the home has appreciated.
For many Colorado buyers in 2026, the equity gap is the biggest financial planning consideration in an assumable deal — often larger than a conventional down payment would have been.
A Real Example From the Colorado Springs Market
Say a seller bought a home in 2021 for $335,000 using a VA loan at 2.875%. They've made 4+ years of payments. Their remaining loan balance today is approximately $308,000. The home is now worth $400,000.
You want to buy that home and assume their loan. Here's the math:
- Purchase price: $400,000
- Assumed loan balance: $308,000
- Equity gap you need to cover: $92,000
That $92,000 is your "down payment equivalent." It goes to the seller at closing in exchange for the home's equity. The loan you're taking over is the $308,000 balance at 2.875%.
Your monthly payment on that $308,000 at 2.875%: $1,277/month P+I
If you had bought the same home conventionally with 10% down ($40,000), you'd finance $360,000 at 6.875%. Payment: $2,364/month P+I.
The assumed loan costs you more upfront ($92K vs $40K) but saves you $1,087/month for the next 25 years. That's $13,044 per year. The break-even on your additional upfront cash is under 5 years.
Why the Equity Gap Varies So Much
The equity gap depends on three variables:
- How much the home has appreciated since the seller bought it
- How long the seller has had the loan (more time = more principal paid down)
- The original loan amount
In Colorado's Front Range market — Colorado Springs, Fountain, Parker, Monument — home values increased 20-40% from 2020 to 2023. That appreciation created large equity gaps on properties bought in 2020-2022.
A seller who bought for $280,000 in 2020 with a 5% down payment has a remaining balance around $245,000 today. If the home is now worth $370,000, the equity gap is $125,000. That's a significant number.
On the other hand, some properties in more stable price markets have smaller gaps. The math always wins — run it before making an offer.
Options for Covering the Equity Gap
You don't have to pay cash for the entire equity gap. Here are the common approaches:
1. Cash at Closing
The simplest option. You bring the equity gap amount in cash, take over the loan, and your only monthly obligation is the assumed mortgage payment. No second mortgage, no complex structure. If you have the liquidity, this is clean.
2. Second Mortgage (Equity Gap Financing)
Some lenders offer second mortgages specifically designed to cover equity gaps in assumable transactions. The second mortgage will be at current market rates — 7%-9% depending on lender and structure — but on a much smaller balance than a conventional first.
Example: $92,000 second mortgage at 8% over 15 years = $878/month. Combined with the assumed first mortgage at $1,277/month, total payment = $2,155/month. Still below the $2,364/month conventional option on the same home.
Not all lenders offer this product. Finding one that does is part of the work.
3. Negotiate the Purchase Price Down
Sometimes sellers are flexible on price to enable assumption, particularly if they're motivated or facing a slow market. A seller willing to accept $370,000 instead of $400,000 reduces the equity gap from $92,000 to $62,000.
This requires a negotiation conversation, but buyers who can close cleanly on an assumable deal have real leverage — particularly with sellers who've had the home on market for a while.
4. Seller Financing of the Gap
Less common, but sellers sometimes carry the equity difference as a private note. This can be structured as a balloon payment due in a set number of years or as installment payments. It requires a seller willing to be a lender, which isn't everyone.
5. Gift Funds
For FHA assumptions, gift funds from family members can be used to cover the equity gap, subject to the servicer's documentation requirements. VA assumption gift fund rules vary by servicer. If this is your plan, confirm it with the servicer before entering a contract.
What About the Original Down Payment?
The original down payment the seller made is now embedded in their home's equity. When you pay the equity gap at closing, you're essentially buying that equity. The original down payment amount is irrelevant to your transaction — what matters is the current loan balance and current home value.
What You Don't Pay
In an assumed mortgage, you do not:
- Originate a new loan (no points, no origination fees in the traditional sense)
- Pay the seller's loan at their loan's original rate — you get it
- Qualify with a bank or mortgage lender (you qualify with the servicer)
You do pay:
- The equity gap (cash or financed)
- Closing costs (title, escrow, recording — typically $3,000-$6,000)
- An assumption fee charged by the servicer (usually $500-$1,500)
- Any required inspections
Colorado-Specific Note: FHA vs. VA Assumptions
FHA: You can assume an FHA loan regardless of veteran status. The FHA loan's MIP (mortgage insurance premium) may still be in place on the assumed loan, which adds to the monthly payment. Worth checking before assuming.
VA: Any buyer can assume a VA loan, but if you're not a veteran, the seller's VA entitlement remains tied to the property until the loan is paid off. This limits the seller's ability to use their VA benefit on a future home. Many VA sellers strongly prefer veteran buyers for this reason.
Should You Assume or Put 20% Down Conventionally?
Run the comparison every time:
| | Assumable | Conventional (20% down) | |---|---|---| | Upfront cash | $92K equity gap | $80K down payment | | Monthly P+I | $1,277 | $2,101 | | Monthly savings | $824/month | — | | Break-even on extra cash | ~1.5 years | — |
In this example, the assumable mortgage is better on every time horizon longer than 18 months. But every deal is different. The key is running the actual numbers on the actual property before deciding.
Talk to Someone Who Knows the Math
Ryan Thomson at assumableguy.com specializes in assumable mortgage transactions in Colorado. He can walk through the equity gap calculation on any specific property and help you understand whether assumption makes financial sense for your situation.
Browse current assumable inventory at assumableguy.com or reach out directly.
Ryan Thomson | Keller Williams | assumableguy.com | Equal Housing Opportunity