Want a 2.5% mortgage? Buy it.

0:01Cardiff Garcia:NPR.

0:11Stacey Vanek Smith:This is The Indicator from Planet Money. I'm Waylon Wong.

0:14Cardiff Garcia:And I'm Stephen Bassaha.

0:16Stacey Vanek Smith:Stephen, you are back. You've returned from the business desk.

0:19Cardiff Garcia:Yes, good to be back temporarily, but I plan on making more regular visits. Sorry I've been gone so long.

0:25Stacey Vanek Smith:We have missed you.

0:26Cardiff Garcia:And I return, Waylon, with a classic question. If you could travel back to any time in history, when would it be? Oh, well, I need indoor plumbing.

0:38Stacey Vanek Smith:That's important. Maybe like the 90s.

0:41Cardiff Garcia:90s? Okay, not too, too far back.

0:43Stacey Vanek Smith:I'll go back to the 90s.

0:44Cardiff Garcia:Yeah, my time travel visit would actually be even sooner, just five years back in the past to 2021.

0:51Stacey Vanek Smith:Oh, you want to go back to the thick of the pandemic? Why? Why?

0:55Cardiff Garcia:We're not the thick of it. But, you know, the one reason I want to go back is so I could get a mortgage. Mortgage rates at the time were crazy low, like less than 3%.

1:05Stacey Vanek Smith:Yes, a distant memory now. And to put that in context, we were just celebrating last week when mortgage rates fell below 6%.

1:14Cardiff Garcia:Lucky for us, there is a way to travel back to 2021 and drag those low mortgage rates into the present. Yes, you can get a 2.5 % mortgage in 2026.

1:27Stacey Vanek Smith:Okay, but if science fiction has taught us anything, Stephen, it's that going back in time comes with a cost.

1:34Cardiff Garcia:Today on the show, we reveal the not-so-simple trick for getting that super low mortgage rate, something you can do to save a lot of money.

1:43Stacey Vanek Smith:If you have a lot of patience and a lot of cash.

1:46Cardiff Garcia:Can't bring it back to the 90s, though. I'm sorry. Put the rugrats away.

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2:43Cardiff Garcia:Not an Apple Card customer? You can apply in the Wallet app on iPhone. Subject to credit approval. Apple Card issued by Goldman Sachs Bank USA, Salt Lake City Branch. Terms and more at apple.co slash benefits. So we're going to start our time travel journey easy, just going back a couple years to 2024. And in 2024, the housing market didn't look all that different from today.

3:07Stacey Vanek Smith:I mean, if anything, the market's even worse. Mortgage rates are a little bit higher and same with the sales price of a typical home.

3:14Cardiff Garcia:And that is why instead of being a homeowner, Brennan Burroughs is living in Florida with the in-laws. And, you know, doing some classic Zillow surfing. I had my little criteria, had my filter on it, and I had that 400 ,000, you know, as low as like 300. Then he sees the house, corner lot, four bedrooms, all cinderblock to handle those Florida storms. I like this, you know, look at the picture. This is like, Brennan, this is nice, nice. Now I look at the description, my eyes lit up. They lit up because in that description was the secret to our time travel and the way to get those cheap, cheap mortgage rates.

3:49Cardiff Garcia:And it's different from how selling a home normally works.

3:52Stacey Vanek Smith:Right. So, Stephen, if I sold you my home, I normally would have to pay off my mortgage in full and then start over with a new mortgage at today's probably higher rates for my next home.

4:03Cardiff Garcia:But it turns out there is a way, Waylon, you can sell me your home and give me your old mortgage rate, too. That is what Brendan saw in the listing, the option to buy the home and get a 2.5 % mortgage rate.

4:16Stacey Vanek Smith:This is called an assumable mortgage. Brendan says his real estate agent, Kai, had told him about assumable mortgages, so he knew what to look for. So then when he saw one for the house he wanted, he did a double take.

4:28Cardiff Garcia:Looked at that again. Call Kai real fast, y 'all want this house. Basically, every government-backed mortgage is assumable. So we're talking Department of Veteran Affairs loans. So lots of vets have this option. And new homebuyers, without a lot of cash, they often get loans from the Federal Housing Administration, and those are also assumable.

4:46Stacey Vanek Smith:About 6 million homes have an assumable mortgage below 5%, according to an estimate from the company Assume List. So that's about 7 % of all outstanding mortgages in the U.S.

4:58Cardiff Garcia:And yes, the home seller still has to give up their low mortgage rate and get a higher one if they're buying another house. But, you know, listing a home with a 2.5 % mortgage rate, that is a big selling point. Like, Waylon, if I was able to buy your house and get that rate, I might be more willing to, you know, pay a little more since I'd still be saving money.

5:20Stacey Vanek Smith:But for as good as transferring a mortgage sounds, few homeowners that have the option actually do it. And that tends to come down to two reasons.

5:29Cardiff Garcia:The first is that this could be a long, drawn-out process.

5:32Stacey Vanek Smith:Yeah, when Brendan Burroughs tried to assume the mortgage for that Florida house, he says it was hard to reach the mortgage company.

5:39Cardiff Garcia:We're just sitting there waiting for a phone call back. Ten days go by, a month goes by, I'm hearing nothing. The companies that actually manage these mortgages have 45 days by law to finish a credit review for the transfer or just finish up the whole process. In reality, it can often take months. In fact, there are companies that their whole deal is helping buyers navigate this, And they want Congress to better enforce that timeline.

6:03Stacey Vanek Smith:The other big problem with transferring a mortgage is that home prices have gone up a lot, like 54 % since 2020.

6:10Cardiff Garcia:So, of course, the original mortgage made when housing was cheaper is no longer going to cover the price of the same house today. It's up to the buyer to make up the difference. And that could be a huge down payment. So basically, my gap of I had to put down$105 ,000.

6:25Stacey Vanek Smith:I mean, that is a lot for a first-time homebuyer, if that's what you need to have on hand just to seal the deal.

6:32Cardiff Garcia:Like, frankly, this is the biggest barrier for assuming a mortgage. Now, Brendan, he was lucky. He made some smart investments years earlier in two little companies, Tesla and NVIDIA. And I can't shop during COVID. So I had the money sitting there.

6:49Stacey Vanek Smith:Wow. Way to time it, Brendan.

6:51Cardiff Garcia:He should probably be hosting this show instead of us. Oh, my goodness. So after some waiting and a big down payment, Brendan did it. He was able to get the house and the two and a half percent mortgage rate.