ASSUMABLE MORTGAGE

Dated: 06/23/2015

Views: 678

What is  'Assumable Mortgage'?

It is a  type of financing arrangement in which the outstanding mortgage and its terms can be transferred from the current owner to a buyer. By assuming the previous owner's remaining debt, the buyer can avoid having to obtain his or her own mortgage.

What this means is if a seller's current loan is an assumable FHA loan, with a fixed rate of 4% for example, and he would like to sell his property and the current mortgage rates are high, let's say 6%, the buyer can then assume the seller's mortgage with the 4% rate. 

However, if the home's purchase price exceeds the mortgage balance by a significant amount, the buyer will either need to provide a sizable down payment or obtain a new mortgage anyway. For example, if a buyer is purchasing a home for $300,000, and the seller's assumable mortgage only has a balance of $140,000, the buyer will need a down payment of $160,000 to cover the difference, or will have to get a separate mortgage to secure the needed funds.

Buyers are typically attracted to homes with existing assumable mortgages during times of rising interest rates. This is because they can assume the seller's mortgage, which was created when interest rates were lower, and use it to finance their purchase.

Find out if you have an assumable mortgage, it may come in handy when it's time to sell your home when interest rates are high. 

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Florida Rodriguez

We just purchased our first home today and I cannot thank Florida enough for all her help. She is very professional and very thorough in assisting us since day 1. She always make herself available and....

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