What is an Assumable Loan in Commercial Real Estate?
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. Determining whether or not a loan is assumable (and under what conditions it can be assumed by a new buyer) can be very important, since otherwise, an owner/investor could face significant prepayment penalties if they need to pay off the loan in order to sell the property.
Assumable Loans Typically Require Lender Approval
In most cases, if a loan is assumable, the new borrower/owner will still have to be approved by the lender in order to ensure that they have the financial means to repay the loan, and 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.