Certified Residential Appraiser Practice Exam

What is the primary benefit of a buyer assuming an existing mortgage during fluctuating mortgage rates?

1. Lower interest rates than new loans

2. Avoidance of down payment requirements

3. Less paperwork involved

4. More stable mortgage terms

The correct answer is: Lower interest rates than new loans

The primary benefit of a buyer assuming an existing mortgage during fluctuating mortgage rates is that it often allows the buyer to secure lower interest rates than what might be available for new loans. When interest rates rise, existing mortgages with lower rates become more attractive. If a buyer assumes such a mortgage, they can take advantage of the favorable terms that were in place before the rate increases, resulting in potential savings over the life of the loan. This can be a significant financial advantage, especially in a high-rate environment, where new loans are considerably more expensive due to increased interest costs. While other aspects, such as down payment requirements and paperwork, can also be simplified through assumption, the overriding benefit is the financial ones tied to lower interest rates, which provides immediate and long-term savings.