Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
We have an assumable mortgage at 2.75%(near Houston Tx if that matters) but our house has appreciated a lot in value since we purchased.We think this is a plus to selling our home, but the real estate agents around here don't seem to understand them or want to deal with the added headache.
You'd think the original mortgage company that keeps sending us emails about what a plus this is, would have some sort of add on mortgage to make it easier for someone to step into purchasing the home-an all in one solution but they don't seem to.
I would think even getting part of the loan at a WAY lower rate would be appealing to someone..Am I missing something?
We have an assumable mortgage at 2.75%(near Houston Tx if that matters) but our house has appreciated a lot in value since we purchased.We think this is a plus to selling our home, but the real estate agents around here don't seem to understand them or want to deal with the added headache.
You'd think the original mortgage company that keeps sending us emails about what a plus this is, would have some sort of add on mortgage to make it easier for someone to step into purchasing the home-an all in one solution but they don't seem to.
I would think even getting part of the loan at a WAY lower rate would be appealing to someone..Am I missing something?
It ABSOLUTELY should be appealing to a potential buyer. It also has the advantage of very low closing costs to go along with the VERY low interest rate.
One thing that YOU should be aware of though is that on these loan assumptions, you (and hubby) would NOT be released from the obligation to see that the loan is repaid in full in the event that the buyers default. Therefore, I suggest that you get a substantial down payment from the buyers and also try to verify (to the extent possible) that the buyers are financially responsible people.
We have an assumable mortgage at 2.75%(near Houston Tx if that matters) but our house has appreciated a lot in value since we purchased.We think this is a plus to selling our home, but the real estate agents around here don't seem to understand them or want to deal with the added headache.
You'd think the original mortgage company that keeps sending us emails about what a plus this is, would have some sort of add on mortgage to make it easier for someone to step into purchasing the home-an all in one solution but they don't seem to.
I would think even getting part of the loan at a WAY lower rate would be appealing to someone..Am I missing something?
So....
If you borrowed @ $2.75% and have a $300,000 balance @ $2.75% and you want to sell the house for $550,000, the buyer has a $250,000 funding gap to fill.
That requirement will limit your buyer pool, for sure.
And, if your buyer isn't well-heeled with $250,000 cash and has to borrow, which loan would be in first place in the event of default? The 2.75% loan is a good bet. That is why the old piggybacks were higher rates and often ARM. Less security for the lender. https://www.consumerfinance.gov/ask-...tgage-en-1955/
We've begun talking about this in our company meetings, I think right now there are not many agents or lenders who really know how do it.
My guess is that it goes about like it did 45 years ago when this type thing was rather common.
1. Write a contract that states what the principals are going to do and when and in what amounts. Get the principals to sign it.
2. Notify the lender (holder of the lien) that Party B is going to be assuming the loan from Party A and that a deed will be recorded that will transfer ownership of the property to Party B. Lender will then send some papers to be signed by Party B that acknowledges they will be added to the loan as second mortgagor on the note. Party A will NOT be released from the note.
3. Hold a closing in which a deed is used to transfer ownership of the property to Party B. At the closing, Party A will receive his equity money less any closing costs, tax prorations, etc. due from him.
4. After the closing, record the deed that transfers ownership to Party B. Party B then moves into the house and begins making payments as called for in the loan agreement. Notify the R/E tax office to begin sending tax statements to Party B.
5. When Party B completes paying off the loan, the lender will send a Release of Lien to Party B to have recorded at the courthouse to show that the Lien has been satisfied and is no longer a lien on the property.
That's it! Party B would then own the house free and clear.
So....
If you borrowed @ $2.75% and have a $300,000 balance @ $2.75% and you want to sell the house for $550,000, the buyer has a $250,000 funding gap to fill.
That requirement will limit your buyer pool, for sure.
And, if your buyer isn't well-heeled with $250,000 cash and has to borrow, which loan would be in first place in the event of default? The 2.75% loan is a good bet. That is why the old piggybacks were higher rates and often ARM. Less security for the lender. https://www.consumerfinance.gov/ask-...tgage-en-1955/
Realistically, it's unlikely that a person who borrowed 97% to 100% of the purchase price just a couple of years ago is going to have nearly that percentage of equity in the house. It's more likely to be in the area of 10% to 20% in my opinion.
So, if a buyer has what might be considered a standard down payment for the house he's wanting to buy, then there's a good chance that if the loan on that house is assumable, he will have enough money to assume it.
The first loan (the 2.75% one) would be in first position until it is paid off completely... which is not what you want to do if you want to assume that loan.
After re-reading the OP's initial post, I see that she says their house has appreciated a lot in value since she and hubby bought it. In that case, some type of secondary financing may be necessary. Of course, if she can find a buyer that has 40% to 50% (or whatever) in cash for the down payment, then that's great. If not, she may want to consider taking a second mortgage on the property.
Personally, if I were in her situation, I would consider carrying a second mortgage at perhaps 8% for a few years if the buyer could come up with about 25% of the purchase price in cash. The way I would structure the payments on the second mortgage would be to use a 15-year amortization schedule but put in a balloon payoff at the end of 5 years.
Then, if at the end of 5 years I didn't really need the cash, I would agree to extending the term of the loan for another 5 years but adjust the interest rate on the extension to reflect market conditions. Basically, I would look at what the banks are charging for first mortgage rates and add a little to that rate due to the fact that this is a second mortgage.
Realistically, it's unlikely that a person who borrowed 97% to 100% of the purchase price just a couple of years ago is going to have nearly that percentage of equity in the house. It's more likely to be in the area of 10% to 20% in my opinion.
So, if a buyer has what might be considered a standard down payment for the house he's wanting to buy, then there's a good chance that if the loan on that house is assumable, he will have enough money to assume it.
The first loan (the 2.75% one) would be in first position until it is paid off completely... which is not what you want to do if you want to assume that loan.
Where do you find the 97--100% loan in the thread?
I don't see where the OP gave any $$$ figures to guide input, other than interest rate.
A 2.75% rate could easily be a 2020 loan, even late 2019. And I would be surprised if anyone borrowed 97%--100% @ 2.75%.
The point stands. Someone will come out of pocket significantly to cover the equity.
Thanks everyone, I will pass this info to my husband, rough numbers we borrowed approx 380k for the home at..I even forget?4% back in 2018, then we refinanced to the 2.75 approx 2-3 years ago?It's an FHA loan if that matters at all.The home has appreciated to 590-620k depending what you look at, so the borrower would have to have a second loan or have a sizable downpayment.
I was just wondering if this is a perk for a homebuyer because our agent tells me that most agents don't understand assumable mortgages and they would in the end have to borrow too much money(unless the huge downpayment) BUT homes in our neighborhood same approx size have sold recently for around 620k. SO, our home would save those people a ton of money, correct?I just see this being a huge help to someone but so far no takers on assuming.
I don't know why someone would sell a home to people they don't know and still accept the responsibility if the new owners default?That would be a huge red flag for me to sell so I hope that's not the case.
Thank you all so much for weighing in!
Where do you find the 97--100% loan in the thread?
I don't see where the OP gave any $$$ figures to guide input, other than interest rate.
A 2.75% rate could easily be a 2020 loan, even late 2019. And I would be surprised if anyone borrowed 97%--100% @ 2.75%.
The point stands. Someone will come out of pocket significantly to cover the equity.
I didn't find it in the thread. However, I believe that the overwhelming majority of assumable loans are VA and FHA loans which require very little to nothing in the way of down payment. Some of those loans (I think) even have provisions for financing a portion of your closing costs.
Therefore, I concluded that the OP likely had either a VA or FHA loan and therefore put very little cash into the purchase other than some closing costs.
EDIT: Now, after going back and reading the OP's post that followed yours above, I see that the OP has CONFIRMED that it is, in fact, an FHA loan.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
