For most of the past decade, assuming a seller's loan was unpopular. New financing was cheap, easy to get, and generally offered more proceeds, so buyers rarely wanted someone else's loan. Higher interest rates changed that.
In Altus Group's Q2 2026 debt survey, even the cheapest property type to finance, apartments, averaged 5.22% all-in, while hotels averaged 6.07% and construction financing averaged 6.08%. Fixed-rate debt secured well below those levels can make a property more valuable and easier to sell.
What an Assumption Is
In an assumption, the buyer takes over the seller's existing loan, keeping its balance, interest rate, and remaining term, subject to the lender's approval. That approval is the catch. Most commercial loan documents give the lender wide discretion to approve or refuse a transfer, so assumability is not something a buyer can count on. The common exceptions are loan types built to be transferable: many agency multifamily loans from Fannie Mae and Freddie Mac, and conduit CMBS loans, where the lender has more limited discretion to turn down a qualified buyer. Bank and life company loans, by contrast, generally can't be assumed unless the documents specifically allow it.
When Assuming Wins
The math favors assumption when three things line up. The assumed rate is meaningfully below what a new loan would cost, enough term remains to capture the savings, and the buyer can fund the gap between the purchase price and the assumed balance. As an illustration, a 1.5 percentage point rate advantage on a $10 million balance is about $150,000 a year in interest. Assumption fees, commonly around 1% of the balance, plus servicer and legal costs, are usually modest against several years of savings like that.
What to Check Before You Commit
Attorneys who work on assumptions point to five areas that buyers should review early:
Loan documentation. Covenants, reserve requirements, and prepayment or defeasance terms all travel with the loan.
Replacement guarantor. The lender will require a qualified replacement for the existing guarantor, typically with net worth and liquidity tests the buyer has to meet.
Structure requirements. Single-purpose entity rules, cash management, and similar provisions may require changes to how the buyer holds the asset.
Permitted transfers. The loan documents define who can take title and under what conditions, and the buyer's structure has to fit.
Cost and time. Servicer approvals and re-underwriting can take longer than a new loan, and the seller's closing timeline has to allow for it.
Two more issues matter in practice. First, the gap: if the purchase price exceeds the assumed balance, the buyer must fund the difference with equity or other capital, and the existing loan documents may restrict secondary financing. Second, the maturity: a below-market loan that comes due in 18 months isn't a gift, it's a near-term refinance at today's rates. The savings only count for as long as the loan lasts.
When to Refinance Instead
A new loan is usually the better path when the existing loan matures soon, when the assumed leverage is so low that the equity gap is unworkable, when the guarantor or structure requirements can't be met, or when prepayment or defeasance terms would limit the buyer's flexibility. A refinance also lets the buyer choose the structure that fits the business plan, which matters for a property that will be repositioned or sold within a few years.
A Note for Sellers
If you own a property with assumable below-market debt, that feature can widen your buyer pool and support a higher price. Review your loan documents before you list, understand what the lender will require of a buyer, and be ready to explain the process. Sellers who treat the loan as a marketing asset often get more from it than those who leave buyers to discover it.
How SF Capital Can Help
SF Capital helps buyers and sellers compare assuming existing debt against new financing, model both scenarios, and coordinate with servicers and counsel through the process. If you're evaluating an acquisition or a sale where existing debt is part of the picture, contact the SF Capital team.
