Some are, most aren’t; an ARM loan is assumable only when the note allows it and the lender approves the new borrower.
Mortgage assumption sounds simple: one owner leaves, the next owner keeps the loan. Paperwork, loan type, and the due-on-sale clause decide what happens. With an adjustable-rate mortgage (ARM), the payment can change after the transfer.
You’ll see how to check the note, what a servicer reviews, and what to price today.
Are ARM Loans Assumable? What Decides It
An ARM can be assumable, but assumability isn’t a feature of “ARM” by itself. It’s a feature of the loan program and the legal documents you signed. Start with three questions:
- What loan program is it? Government-insured loans often allow assumption; many conventional loans don’t.
- What does the note and mortgage say? Look for a due-on-sale or due-on-transfer clause and any section labeled “assumption.”
- Will the servicer approve the new borrower? Even on loans that allow assumption, the buyer usually must qualify.
| ARM Situation | Assumption Odds | What Usually Decides It |
|---|---|---|
| FHA-insured ARM on a primary home | Often allowed | Loan is generally assumable with servicer review; buyer may need credit approval and an assumption package. |
| VA-guaranteed ARM | Often allowed | Servicer and, in some cases, VA approval of the buyer’s credit; release of liability matters for the seller. |
| USDA Section 502 ARM | Sometimes allowed | Eligibility rules and servicer approval; terms can vary by program and file status. |
| Conventional ARM sold to Fannie Mae or Freddie Mac | Case-by-case | Due-on-sale language plus agency servicing rules; some transfers can be allowed if the buyer is creditworthy. |
| Portfolio ARM held by a local bank or credit union | Case-by-case | Bank policy and the note; some lenders allow assumption as a retention move, others require payoff. |
| Jumbo ARM | Less common | Investor guidelines and strict due-on-sale enforcement are common in jumbo notes. |
| ARM transfer after death to a spouse or child | Often permitted transfer | Federal rules limit when a lender can enforce due-on-sale for certain family or trust transfers. |
| ARM transfer into an LLC | Low | LLC transfers often fall outside common exemptions; the lender may treat it as a trigger event. |
What “Assumable” Means With An ARM
Title can change hands without the loan changing hands. A true assumption puts the new owner on the note, and some lenders also issue a release that removes the seller’s liability.
ARM Loan Assumption Rules For Common Loan Types
Loan type is the first filter.
FHA ARM loans
FHA-insured forward mortgages are generally assumable under program rules, with servicer review and buyer qualification. See HUD’s FHA assumability FAQ.
VA ARM loans
VA-guaranteed loans often allow assumption with lender approval of the buyer’s credit. Ask whether the seller will receive a written release of liability.
Conventional ARMs
Conventional ARMs are often not promoted as assumable. Some transfers may be allowed when the loan is current and the buyer qualifies under investor rules.
Portfolio ARMs
Portfolio lenders set their own policy. Get the answer in writing, including fees and any release terms.
Fast Ways To Tell If Your ARM Can Transfer
You don’t need guesswork. You need the right page in the right document.
Step 1: Find the note and the security instrument
Start with your closing package, your online portal, or a copy from your county recorder if you’re missing files. Look for the promissory note and the mortgage or deed of trust.
Step 2: Search for these terms
- Due-on-sale
- Due-on-transfer
- Assumption
- Transfer of the property
- Successor in interest
If you see language that says the lender can demand full payment when the home is sold or transferred, that’s the clause you must work around. It doesn’t mean an assumption is impossible, but it means the lender has control.
Step 3: Identify the investor or program
The servicer on your monthly statement may not own the loan. Ask who the investor is, or check any “loan type” field in your portal. FHA and VA clues often show up on the first page of the note or in the closing disclosures.
Step 4: Call the servicer and ask for the assumption package
Use a script that keeps the call tight:
- “I want to request a mortgage assumption.”
- “Is this loan eligible for assumption?”
- “What is the fee schedule and document list?”
- “Will you issue a release of liability for the current borrower?”
Transfers That Don’t Always Trigger A Payoff Demand
Sometimes the goal isn’t a sale. It’s a clean title change after marriage, divorce, or a death in the family. Federal rules limit when lenders can enforce due-on-sale clauses for certain transfers. The rule list is in 12 CFR ยง 191.5.
These protected transfers can still feel messy. A lender can ask for paperwork to confirm the situation, and the borrower still needs to pay on time. But the rule can reduce the risk of a sudden demand for full payoff when the transfer fits an exemption.
Divorce and separation transfers
When one spouse takes full title as part of a legal separation agreement, lenders often treat it under the protected-transfer rules. This is not the same as an assumption that releases the other spouse from liability. If you want the loan in one name, you still need the lender’s assumption process or a refinance.
Inheritance and surviving family members
After a borrower dies, transfers to a relative who occupies the home can fall under the exemptions. Each servicer asks for a different stack of documents, often including a death certificate and proof of heir status.
Living trust transfers
Many homeowners move title into a living trust for estate planning. Federal rules can protect some trust transfers when the borrower remains a beneficiary and occupant. If you’re planning a trust move, ask the servicer for its document checklist first, so you don’t trigger a review with missing paperwork.
ARM Payment Details That Matter During An Assumption
An ARM assumption is not just “take over the same payment.” The new borrower steps into the adjustment schedule. That means the next rate change, the index used, and the caps all stay in force.
Know the index and margin
Most modern ARMs use an index like SOFR plus a margin. The margin is set in the note and does not change. If the index rises, the payment can rise at the next adjustment.
Check the caps, not the teaser rate
Caps limit how far the rate can move at each adjustment and over the life of the loan. When you price an assumption deal, run three payment scenarios: the current rate, the next scheduled cap move, and the lifetime cap. If the buyer can’t carry the cap-level payment, the deal can fall apart after closing.
Ask about escrow and payment timing
Assumption closes rarely line up with escrow analysis dates. The new borrower may see an escrow change within months if taxes or insurance renew. Build room in the budget for that swing.
Costs, Timing, And Paperwork You Should Expect
Assumptions often move slower than a standard purchase mortgage because the servicer is working two files at once: the property transfer and the credit file for the buyer. Plan for delays and keep the purchase contract flexible on closing date.
Fees vary by lender and program. Expect an assumption fee, credit report charges, and recording costs. There may also be a new appraisal requirement for some programs or investor rules, even when the buyer is not taking a new loan.
| Step | What You Deliver | What You Get Back |
|---|---|---|
| Initial request | Signed assumption request form | Fee quote and full checklist |
| Buyer qualification | Income docs, ID, credit authorization | Approval or conditions list |
| Title and payoff review | Purchase contract or transfer decree | Assumption agreement draft |
| Closing | Signed assumption agreement, funds to close | Recorded documents and new billing setup |
| Release check | Written request for release, if offered | Release of liability letter or denial |
Equity Gap Planning Before You Commit
Most assumption deals fail on the gap between the home price and the remaining loan balance. The lender transfers only the balance. Everything above that balance is paid to the seller at closing.
Map the gap early. Cash works. A second loan can work if the seller, lender, and title company will close it on the same day. If neither fits, renegotiate price or walk away before fees pile up. Ask the title company how they want funds wired.
Closing Checklist Before You Spend Money
Run this list before you order inspections, pay earnest money, or book movers.
- Verify the loan program (FHA, VA, USDA, conventional, portfolio) and confirm assumption eligibility with the servicer.
- Ask the servicer for the assumption package, fee schedule, and expected review timeline.
- Ask, in writing, whether the seller will receive a release of liability.
- Pull the ARM terms: index, margin, caps, next adjustment date, and lifetime cap.
- Price three payment cases: current rate, next cap move, lifetime cap.
- Map the equity gap and decide how it will be funded at closing.
- Keep the purchase contract flexible with a longer closing window and a clear denial exit.
- After closing, confirm the first payment date, escrow setup, and where insurance bills should be sent.
If you’re still asking, are ARM loans assumable? start by treating it as a document question, not a rumor question. Get the note, call the servicer, and request the assumption package. You’ll know within days whether the path is open or whether a fresh loan is the cleaner move.
One last check: are ARM loans assumable? only when the lender says yes in writing. Until then, keep your plans flexible and your deadlines realistic.