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Will it be wise to accept assumable mortgage

Posted on: 09th Nov, 2005 01:35 pm
I have been offered a home on assumable mortgage. Will it be wise to take?
Hi Radolph,

It is a good decision for a buyer to go for an assumable mortgage loan if the rate is lower than the existing market rate, available to the buyer due to current market conditions or poor credit history of the buyer.

But you should also check in for the assumption fee and other conditions before deciding to opt for it.

If conditions favor you, then it is a good option especially today, when market rates are showing an upward trend.

For some more information you can refer assumable mortgage here.

God bless you.

For MortgageFit,
Samantha
Posted on: 09th Nov, 2005 01:50 pm
Hi,

I would like to add some more on why and when it is good. Suppose a home seller is having a mortgage at 6% and a new buyer is able to get 7.5% in the current market. So, if the buyer goes in for this mortgage at the rate existing with the seller i.e.6%, then he has to pay less.

As Samantha said, when the rates rise, then this loan will fall much cheaper comparatively. This loan is also helpful in saving money in closing costs. But it has to be checked whether the seller is asking for much higher rate on the property.

Hope this information will help.

Regards,
Blue
Posted on: 09th Nov, 2005 02:03 pm
Hi,

I am pleased with the response that I got from this forum. Thanks for those suggestions and information.

Radolph
Posted on: 09th Nov, 2005 02:38 pm
as a seller of a home is it wise to sell with an assumable? what are the ups and what are the downs?? does it make it hard to buy a house shortly after? am i liable for any period of time?
Posted on: 13th Dec, 2005 01:07 pm
marc,

i think a seller can decide to sell with an assumable but he should consider which method is used like,

whether the seller remains responsible for the payments and the buyer is not liable to the lender except that the property itself may be lost to foreclosure or

if its ordinary assumption wherein both seller and buyer are responsible for making the payments to the lender or

lastly if its with novation which states that the seller is released from liability and the buyer is responsible for making the payments.

the advantage the seller gets is in the form of a higher price for the house. but risk is that unless the buyer qualifies to assume the loan the seller has a degree of responsibility for repayment of the loan.
Posted on: 13th Dec, 2005 02:58 pm
Hi,

I wanted to addin one more point,

If someone assumes your mortgage and your lender "qualifies" them and then releases you from liability, you will be ok as soon as the lender changes the name on the loan and begins reporting to the credit bureaus under that person's name. In the meantime, their payments will be reported as yours, since the credit bureaus think it is still you.
Posted on: 13th Dec, 2005 03:51 pm
Hi Marc,

Apart from what Aberto and Dimitra have mentioned I think some of the other points that count are like, When assuming an existing mortgage, buyer will have to pay some cash to you to compensate you for the amount of equity that you have in the home. It's kind of like a down payment, since it's cash paid directly from buyer to you.

When the buyer assumes the mortgage, he doesn't always have to satisfy the bank, but he has to compensate you for the amount of equity that you have in the property (i.e., the amount that you paid as a down payment, plus the amount of principal payments made towards the loan, plus the amount the property has appreciated since you bought it).

This amount the buyer pays you could be a little or a lot, depending on how much you have put down when you bought the house, how many years you had been making payments and how much the property has appreciated during that time.
Posted on: 13th Dec, 2005 04:23 pm
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