Assumable Home Loans
What is an assumable Home Loan and what should you know about assumable home loans?
Assumable Home Loans are home loans in which a new buyer can simply assume the seller’s mortgage as it is from the current holder of the home loan. Meaning that if a home owner has a 30 year fixed loan at a 5.5% interest rate, the person purchasing the home would acquire the same exact terms and balance that the seller had on their mortgage contract.
The primary benefit of an assumable home loan is that in times of higher interest rates, an assumable home loan is advantages to both the buyer and the seller. With an assumable home loan the seller can potentially get a higher price than what the market would normally bare and the buyer can potentially get a lower interest rate.
Typically interest in assumable home loans exists only in times of high mortgage rates. Usually, when mortgage loan interest rates are low, the value of an assumable rate home loan diminishes greatly to the potential buyer.
Not all home mortgage contracts allow for assumable home loans so if this is something that you are interested in then you should be sure to negotiate it into your contract at the outset of your home loan negotiations.
Additionally, in a desperate real estate environment such as the one we are in now, an assumable home loan is a potentially a great way to scoop up a great deal on a property from a buyer who is on the brink of foreclosure.