Assuming an existing commercial loan

The decision

An assumption trades a lower rate for less control. You keep the seller’s rate, term and prepayment terms, and you give up the chance to size and structure your own loan. It wins when the rate gap is large and the remaining term is long enough to matter. It loses when the balloon is near or the gap to your price is too big to fill cheaply.

Which loans are assumable

Loan	Assumable?	What it takes
Fannie Mae or Freddie Mac	Generally yes, with consent	Buyer meets the agency’s sponsor standards; transfer fee; new single-purpose borrower
CMBS conduit or SASB	Generally yes, with servicer consent	Servicer and sometimes rating agency review; assumption fee; legal costs
HUD-insured (223(f), 221(d)(4))	Yes, through HUD’s transfer review	HUD review of the new owner and management; longest timeline
Life company	Sometimes, often once	Lender consent; terms in the note
Bank or credit union	Rarely	Most bank notes are due on sale; a new loan is the norm

Securitized loans are assumable for a structural reason. Under the REMIC rules a significant change to a loan can create tax problems for the trust, and the rule is explicit: Assumption is not a significant modification¹. So the trust can let a buyer step in without disturbing the bond structure.

Worked example: what the low rate is worth

Illustration. You are buying a building for $9,000,000. The seller’s agency loan has a $6,000,000 balance at 4.25% on a 30-year schedule with five years to maturity. A new loan of the same size would cost an illustrative 6.50%.

Line (illustration)	Assume the loan	New loan
Annual debt service on $6,000,000	about $354,000	about $455,000
Annual savings	about $101,000
Present value of five years of savings at 6.50%	about $430,000
Equity you bring before costs	$3,000,000	$3,000,000

The below-market loan is worth roughly $430,000 to you, before the assumption fee and legal costs. That is money you can pay the seller for, or keep. For context, the 2025 HMDA median on new apartment loans was 6.50% median note rate on 2025 multifamily originations², and recent conduit loans carried a weighted average coupon of 6.43%³. A loan written well below those levels is an asset.

Now the catch: if you need more than $6,000,000 of debt, you need a second piece. If the assumed loan bars a second mortgage, the gap goes to cash, preferred equity or a seller note, and the blended cost rises. Model the stack with the blended rate calculator.

When assumption loses

• The balloon is close. If the loan matures in a year or two, you inherit a refinance soon after buying. The rate advantage is worth little.
• The balance is small against the price. A large gap filled with expensive capital can cost more than the rate saves.
• The prepayment terms do not fit you. You inherit the seller’s yield maintenance or defeasance. If you may sell early, price it: CMBS loans can defease only after at least 2 years from the securitization closing, not the loan closing⁴. The borrower pays rating agency fees and the other expenses of defeasance⁴.
• The loan’s reserves and cash management are heavy. Some older loans carry springing lockboxes or reserves you must fund at assumption.

The assumption process

1. Read the note and loan agreement. Find the transfer section: whether assumption is allowed, the fee, and the buyer standards.
2. Request the servicer’s assumption package. It lists the documents and the fee deposit.
3. Submit the buyer and guarantor package. Financial statements, schedule of real estate owned, organizational chart, management plan.
4. Third-party updates. The servicer may order an updated property condition report, environmental screen or appraisal.
5. Consent and closing. The assumption agreement is signed with the purchase closing, and the seller’s guarantor is released if the lender agrees.

Documents the servicer will ask for

• Purchase and sale agreement.
• Buyer entity documents and an organizational chart down to the individual owners.
• Financial statements and real estate schedule for each new guarantor.
• Property management agreement and the manager’s track record.
• The fee deposit and any lender-required legal deposit.

Pitfalls

1. A financing contingency that is too short. Assumptions can outlast a standard contingency. Negotiate time.
2. Assuming you can add debt. Many loans forbid it. Ask before you count on a second piece.
3. Inheriting reserve shortfalls. Ask the servicer for the reserve balances and any required repairs before you close.
4. Missing the guarantor change. Without a replacement guarantor, the lender will not consent to the transfer.
5. Treating the rate as the whole story. Prepayment, maturity and reserves can make a cheap loan expensive.