Assumable Mortgage Loan Updates
Ok so 3 more posts today that I’ve dug up – I’m an information JUNKIE on this stuff lately. Give em a browse and let me know what ya reckon. They’re just from a few different sites I’ve been surfing lately that are generally good for information like this…
Assumable mortgages allow a buyer to assume a seller’s existing mortgage loan instead of obtaining a new one. The buyer simply takes over the seller’s … Read More…
“However, good sponsors have relationships that can get loans, while some loans are assumable for property buyers.” What’s more, spreads are attractive now, … Read More…
Institutional Investors Throwing Big Money Around Class A Quality Retail Property
“Primarily, this financing is on rollovers, deals that are already in their pipeline, or trophy deals that are rock solid and the kind of loans they want to … Read More…
That’s all the news for today guys, so until next time, thanks for stopping by.
Assumable Loans And Resale Value
The value of an assumable loan comes from two sources. It is often easier for the buyer to qualify when assuming a loan and the payments may be lower than for new financing. However, its value may be limited by two important factors. If the balance of the loan is much below the asking price, the loan may not be worth much. For the buyer to assume, either a large cash down payment is requited or additional financing will be needed. This extra financing may be a loan provided by the seller. Second, if the rate on the existing loan is close to or above the going rate, there is little advantage to assuming it.
How do you know if your loan is assumable? An FHA or VA loan is likely to be assumable. A conventional loan is not likely to be assumable. Look in your loan contract for a “due on sale” clause. If it is there, the lender has the right to call in the loan when you sell the home. There are assumable conventional loans that require a slightly higher interest rate.
If you have an assumable loan at an interest rate below the market, you should get a higher price at the sale. Remember that when you repurchase, you will have to pay more for financing. A higher resale price compensates you for giving up favorable financing.
How much is the loan worth? Consider that, since the loan payments are lower, the buyer could pay a higher price and still make the same payments. Say you have a home that is worth $100,000. You have an assumable loan for $70,000 at 8% interest. There are 25 years left in the teim. A new loan for $70,000 at the prevailing rate of 10% and 30 years requires a monthly payment of $614.30. Your loan’s payments are $540.27. The monthly savings of $74.03 would service a loan at the market rate over 25 years for $8147. Therefore, a buyer who assumes the loan could borrow an additional $8000 and still enjoy lower payments than by using totally new financing. Whether you could extract this amount in the sales price depends on market conditions. However, the assumable loan provides an important sales tool in any market.
If you think you may sell your home in the near future, you may want to refinance with a new assumable loan at a relatively high loan-to-value ratio. This will provid
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e a form of insurance in case interest rates rise or mortgages become hard to get when you do sell.
This article may be published freely as long as you keep the below credits:
Article by (Tommy Lee). For more info on Finance and Refinancing Mortgage loans, visit http://www.smartrefinance.net
By: Jack Fredman PhD
Article Directory: http://www.articledashboard.com
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