Wouldn’t it be great if you could hop in a time machine and go back a few years to lock in a much lower interest rate on a home loan? Where’s a DeLorean when you need one?? ⚡
If you’re short one operational flux capacitor, you might instead look for an assumable home mortgage, which can make you feel like you’re paying yesteryear’s prices for today’s home purchase.
Here are Five Fast Facts on assumable home mortgages:
- 🤔 What Is It - An assumable mortgage is one where a buyer just takes over the seller’s mortgage at its existing finance rates and terms instead of starting a new one. Kinda like a contractual Mr. Ripley.
- 👍 Good For Buyers - Today’s interest rates for 30-year fixed mortgages are around 6.7%. But, around 85% of existing homeowners have a rate under 6%, and almost a quarter of homeowners have a rate below 3%. Quite the incentive there!
- 📈 Ramping Up - Assumed mortgages on FHA loans rose by 72% in 2023, and by 628% on Veterans Affairs loans. They are on track to more than double this year, too. Of course, even then we’re only talking about a few thousand. They’re rarer than an intelligent TikTok video!
- 💸 The Catch(es) - As with any deal that seems too good to be true, there are catches. First, only government-sponsored loans are eligible, ruling out about 75% of all mortgage loans today. Also, buyers will have to put down a much bigger down payment, usually the difference between the sale price and the balance on the existing mortgage. Of course, then you might as well just pay cash for the whole thing, right?
- ⛔ Just One Problem - There isn’t much upside for lenders, so they don’t generally even talk about them, much less push them. And why would they, when they are losing out on today’s higher interest rates? They’re so rarely used that many lenders don’t even understand them or how they work, so that’s another reason they’re hard to come by.
🔥Bottom line: So, it’s a great way to get a tremendous rate on a home loan…if you can find a seller and a lender willing to do it. Good luck! Hopefully you don’t need roads to get up to 88mph!
Do you know of anyone who assumed a mortgage?
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