Don’t Assume Too Much

Did you know a buyer can assume the balance on a seller’s home mortgage loan at their current interest rate? Well, if it sounds too good to be true, it might not be. We’re here to sort out the pros and cons.

CHIC (Pearl)

The most obvious benefit to the buyer would be assuming a mortgage with a lower interest rate than what they could expect to get with their credit history. It’s a good concept for the times we live in, when the added costs of buying a home can be overwhelming for many people. The program is limited to loans from the Federal Housing Administration or VA, and the buyer must be ready and willing to throw in a down payment determined by the total cost of the home. You’ll also need an amenable loan servicer, or the whole plan might fall through.

GEEK (Kevin)

Even if a buyer can swing it, they can only assume the current loan balance to get the lower interest rate. If the purchase price ends up higher than the loan balance, the buyer will need to take out a second loan to make up the difference — or come up with the cash. Either way, the numbers don’t add up, especially when we’re talking about deltas of hundreds of thousands of dollars. That’s why it’s difficult to impossible to find a loan servicer willing to accept a lower interest rate than they could get from a brand new loan to the buyer.