Assumability is the ability to transfer an outstanding mortgage and its terms from the current owner to a buyer, thus allowing the new buyer to acquire the property without obtaining a new mortgage. In the case of HUD 223(f) loans, they are fully assumable with lender approval and a 0.05% fee. HUD 232 and HUD 232/223(f) loans are also fully assumable with FHA approval and a small fee.

Having an assumable loan can make your property significantly more marketable, especially in an environment where interest rates are rising. This is because a new borrower would not be able to get loan with a comparable interest rate on the open market, and could save a significant amount of money as a result of the loan assumption.

The benefits of assumability in relation to HUD 223(f) and HUD 232 loans are that it allows the new buyer to acquire the property without obtaining a new mortgage, and can save them a significant amount of money as a result of the loan assumption. Additionally, HUD 232 and HUD 232/223(f) loans are fully assumable with FHA approval and a small fee.

The risks associated with assumability are that the buyer must meet strict borrower requirements in order to be eligible for the loan assumption. This means that the lender must ensure the new borrower has the financial means to continue repaying the loan and that they aren't a financial risk. Additionally, in many cases where loan assumption is allowed, like with HUD multifamily loans, a buyer must pay a fee — typically between 0.05% and 1% of the original loan amount to assume the loan. CMBS financing sometimes allows loan assumption as a means of avoiding strict prepayment penalties associated with conduit loans, generally along with a standard 1% assumption fee as well.

The requirements for assumability vary depending on the type of loan. For HUD 223(f) loans, they are fully assumable with lender approval and a 0.05% fee. For SBA 7(a) loans, the individual assuming the loan needs to be the primary owner of the business, and should have equal or better business experience/management skills than the current borrower. They must also have good credit (usually 680+), have the financial strength to fully repay the loan, and sign a written agreement stating all terms of the loan assumption. The agreement must also have a “due on sale or death” clause, and the assumption must not have a negative financial impact on the business. Lastly, the seller must not keep the title of the property as collateral/loan security. For HUD 223(a)(7) loans, they are fully assumable with HUD approval.

In commercial real estate, an assumable loan is a loan that can be taken over by a buyer when the owner of the property sells. This can be very important, as it can help an owner/investor avoid significant prepayment penalties if they need to pay off the loan in order to sell the property. In most cases, if a loan is assumable, the new borrower/owner will still have to be approved by the lender. The lender needs to ensure the borrower has the financial means to repay the loan, and that they aren't going to be a serious financial risk. For some kinds of loans, such as HUD multifamily loans, having a new buyer assume a loan requires a small fee of between 0.05% and 1% of the original loan amount. In many situations, CMBS loans are also assumable for a small fee.