fbpx
Where Did the Assumptions Go?
Mortgage assumptions have not been a practical matter for the last 30 years because mortgage rates have been on a steady decline. Even if the seller had a rate lower than the current rate, the new purchaser must qualify to assume the loan. In the case of conventional loans, the lender has the right to […]
Where Did the Assumptions Go?
Mortgage assumptions have not been a practical matter for the last 30 years because mortgage rates have been on a steady decline. Even if the seller had a rate lower than the current rate, the new purchaser must qualify to assume the loan. In the case of conventional loans, the lender has the right to […]

ESZlIdy5rEC3iPWvSp4a3w.jpg

Mortgage assumptions have not been a practical matter for the last 30 years because mortgage rates have been on a steady decline. Even if the seller had a rate lower than the current rate, the new purchaser must qualify to assume the loan.

In the case of conventional loans, the lender has the right to increase the rate to the current rate which neutralizes the reason for assuming the loan. This change took place in the early 1980’s when lenders added due on sale provisions so lower rates could not be assumed.

FHA and VA loans can be assumed at the existing rate with the provision that the purchaser qualifies for the loan. This could be an advantage if the rate on the loan to be assumed was lower than the current mortgage rate for FHA or VA and the buyer is going to owner-occupy. Unfortunately, investors are prohibited from assuming FHA and VA loans.

Besides the obvious advantage of a lower rate which would have a lower payment, the closing costs are lower on an assumption than originating a new loan. Another benefit is that the loan will be further into the amortization schedule than starting a new 30-year loan which means it would be retired sooner while the equity is also growing faster.

The current rates are close to one-percent lower than they were a year ago, so, assumptions are probably not a method of financing a home purchase in the near future. The Freddie Mac forecast expects rates to remain low, possibly at a yearly average of 3.0% in 2021.

Mortgage rates have remained low since the Great Recession even though experts anticipated they would start trending upward. If rates increase, especially rapidly, assumptions of FHA and VA loans could easily be a tool that buyers and real estate professional alike will be employing. For sellers with an assumable loan at a below market rate, it could add to the value of the property as well as the marketability.

LIST OF BLOGS

The Skinny on 1031 Exchange

The Skinny on 1031 Exchange A 1031 exchange refers to Section 1.1031 of the Internal Revenue Code which was passed in 1990. After the death of a 1031 Exchange that is no longer always the case. What kinds of Property Qualify? A 1031 Exchange enables sellers of some...

Realty Investment Trust

Property Investment Trust Realty Investment Trust: Enabling you to be a part of the celebration Genuine estate is a huge organization and everybody appears to desire to invest in genuine estate. There are stories about individuals who made $50000 in a fortnight by...

Do Not Become a Mortgage Industry Crisis Statistic

Do Not Become a Mortgage Industry Crisis Statistic It's obvious that the U.S. real estate marketing is having among its biggest downturns given that the early 1980s. Get a paper or switch on the news and you are swamped with a day-to-day report of more foreclosures,...

5 Things You Should Know Before You Flip A Property

5 Things You Should Know Before You Flip A Property When turning a home your cash is made at the purchase not at the sell of the home. Lots of times individuals purchase a home with the intensions of making a big revenue just to discover out that they might not make...

Tax Benefits Available through Investing in Rental Property

Tax Benefits Available through Investing in Rental Property If you currently own a home you might be rather familiar with numerous of the tax advantages used by owning rental home. By utilizing a home loan to acquire rental home you extremely well might be able to...

1031 Exchange Companies

1031 Exchange Companies The most convenient technique to start a 1031 Exchange deal is to get in touch with a great Exchange Company. The info worrying the exchanger, time and location of the closings, and a copy of the agreement to offer the given up residential or...

Is It Time To Buy A House?

Is It Time To Buy A House? At some point as you're composing out your lease check, you get to the point where you look at the quantity and believe to yourself - at this rate, I might BUY a home. If you're fed up with paying lease every month that's high enough to fund...

How to Sell Your House by Lease Options

How to Sell Your House by Lease Options Lots of people purchase a home then need to move within a couple of years, due to divorce, moving or monetary troubles. With no equity however, it can be almost difficult to discover purchasers and you still have real estate...

Taking care of a Rental Property

Taking care of a Rental Property Those who live in a rental residential or commercial property might have concerns concerning how they must care for their residence. While dealing with the residential or commercial property with regard and not purposefully doing...

RECENT POSTS

1031 Exchange Companies

1031 Exchange Companies The most convenient technique to start a 1031 Exchange deal is to get in...

ABOUT  TWENTY
THREE HOMES

The Twenty Three Homes are one of the premiere real estate groups locally, nationally and internationally, specifically dealing with high-end properties and exclusive clientele. Partner with Keller Williams Twenty Three Homes are full service real estate experts whose clients benefit from the custom tailored, hands on service while receiving all the exclusive amenities and resources of one of the most established and respected firms in the business.

GET IN TOUCH