Assumable Mortgage?

It’s no secret the Real Estate market is not the same as it was earlier this year. The number one factor in the change in the Real Estate temperature is the rise in interest rates. In January of 2022 interest rates were around 3.22%. Today, the national average is a staggering 7.04%. The difference in these rates could be several hundred to several thousands of dollars. This is causing many issues when it comes to affordability for many potential buyers and a tough sell for many sellers. So what are the options?

While there is not a one size fits all solution, there is one question that should be asked every time someone is taking steps to buy or sell a home. That question is “is this loan assumable?” So, what exactly is an assumable loan (or assumable mortgage)? An assumable loan is one that allows a buyer to essentially take over (or assume) the loan terms and the rate the previous owner already has. 

This can be an incredible advantage to buyers as they are able to have a significantly lower interest rate over a new 30 year mortgage. The negative is, there could be a massive downpayment required in order to assume the loan.

For Example: If a seller is selling a home for $1,000,000 and they still owe $500,000 with a 3.5% interest rate, then the new buyer would have to bring $500,000 in cash to cover the difference of the asking price to how much the loan balance is remaining. Another item that is a must is that the buyer must be fully approved for the loan by the current lender. An assumable loan stays with the same lender that currently has the loan, thus causing the buyer to be fully approved by that lender.

Assumable Mortgages are toolsl that both buyers and sellers can benefit from. Be sure you are asking your agent and lender about Assumable Mortgages as it could save your bank account a good chunk of change. VYBE agents are here to help with all your Real Estate needs! Give us a shout to connect with an agent today!