Should you take advantage of an assumable low-interest-rate mortgage
Posted by John Reed on
Assuming a low-interest mortgage. Is that a good idea?
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There is no advantage to a home buyer to taking over an existing low-interest mortgage. Why not? The house will sell for a higher price if it has a low-interest mortgage. So what you don’t pay interest you WILL pay in a bigger down payment and a higher price than if the home did NOT have a low-interest mortgage. It all comes out in the wash.
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Is there an advantage for the seller of such a house to a buyer who assumes the low interest mortgage? Yes. Now I read that the mortgage document people drag their feet on these assumptions. So yes, you can sell your house for more money if you can let them assume your low-interest rate mortgage. If the foot dragging and other hassles do not cancel out the increased price, it’s good for the seller.
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Another point, as a general rule, you have to put more down on a house where you are assuming the mortgage.
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Basic principle: there is no free lunch. You always pay the market interest rate—one way or another. If it is not in the mortgage payment, it is in the price of the house. SELLERS CAN benefit if it does not take too much time and effort to get that for the buyer.
.
There is no advantage to a home buyer to taking over an existing low-interest mortgage. Why not? The house will sell for a higher price if it has a low-interest mortgage. So what you don’t pay interest you WILL pay in a bigger down payment and a higher price than if the home did NOT have a low-interest mortgage. It all comes out in the wash.
.
.
Another point, as a general rule, you have to put more down on a house where you are assuming the mortgage.
.
Basic principle: there is no free lunch. You always pay the market interest rate—one way or another. If it is not in the mortgage payment, it is in the price of the house. SELLERS CAN benefit if it does not take too much time and effort to get that for the buyer.
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