Interest rates are rising, and we’re unsure if we’re nearing a peak or if they will continue to soar. All we know is that they’ve nearly doubled in the past year, and this poses a problem for some of our clients at the mortgage desk.
These days, home buyers are doing everything they can to score the lowest interest rates possible, while sellers are working overtime to cut deals to get their real estate off their hands. An old, dusty mortgage option that we haven’t seen in a while is emerging from the bottom of our toolboxes, and it’s helping buyers and sellers accomplish their real estate goals in today’s volatile financial conditions. That tool is called an assumable mortgage.
What Is an Assumable Mortgage?
An assumable mortgage can be reassigned from one borrower to another. This means that a current home buyer can take on, or “assume,” the seller’s mortgage balance, term and interest rate.
When interest rates are exponentially rising, assumable mortgages become relevant. They can save buyers thousands in the right situation.
Are All Mortgages Assumable?
Most government-backed mortgages are assumable. Here is a list of loans that might offer this benefit:
Unfortunately, most conventional mortgages, including Fannie Mae and Freddie Mac loans, don’t fall under the assumable umbrella.
Advantages to Assumable Loans: A Buyer’s Perspective
From a buyer’s point of view, here are two reasons to look for homes that come with an assumable loan option:
- When current interest rates are high, the buyer could potentially save a lot of money in interest over the life of the loan.
- Assumable mortgages typically come with fewer closing costs for the buyer.
Assumable Loans Benefit the Seller Too!
It’s tough to sell a home when interest rates are rising. An assumable mortgage might solve this problem. Here are a couple of reasons why assumable mortgages are saving sellers in 2022:
- Assumable mortgages are a selling point for buyers who want to dodge high interest rates.
- Sellers might be able to price their homes a little higher than they normally would if they have an assumable mortgage attached to the sale.
Contact MortgageDepot Today!
If you’re looking to buy or sell your home, connect with us today! Our experienced loan professionals will help you decide if an assumable mortgage is right for you.
Contact one of our loan consultants for more information.