Assumable Mortgages

Fast! 2011 Refinance To FHA Assumable Mortgage

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Why To Refinance Now To An Assumable Mortgage

Refinancing to a FHA assumable mortgage loan may be the smartest financial move you have ever done. There are several factors which makes refinancing to FHA assumable mortgages more lucrative than ever. The main benefit to refinance now at 2011 to a FHA mortgage loan is because the rates are low and are expected to increase in the coming years. So now is the last chance to get an assumable mortgage at it’s highest value.

What Is An Assumable Mortgage Loan

An assumable mortgage is a regular mortgage which can be transfered from the seller to the buyer. The buyer buys the house and accepts the terms and rates of the current mortgage, and assumes all the liability from the seller. The buyer does not need to shop for a new mortgage, the buyer gets the mortgage as-is with the same rates as the seller have locked a few years back. If you are the seller it is important that you get a letter from the lender which releases you from all liability to the mortgage from the closing point/transferring moment.

1. Assumable Mortgage Loan Example:

Smith has a home for sale at the price of $150,000 and has an assumable mortgage loan of $130,000 with 5% interest. Jack wants to buy Smith’s home. With an assumable mortgage, Jack only needs to add $20,000 (plus closing fees) to own Smith’s home and mortgage.

2. Another Assumable Mortgage Example:

Robert bought a home with an assumable mortgage loan of $150,000 with 5.5% interest rate. Three years from now, the mortgage balance is $120,000 and Robert wants to sell his home. Sally is looking to buy a home, she does her financial homework and finds that the current mortgage rates are for 7.5%. Robert offers his home to Sally at $170,000 with an assumable mortgage. Sally can buy the home assuming the mortgage and enjoy $120,000 of mortgage with 5.5%. She will need a $34,000 as down-payment (20% from $170K) and a small $16,000 second mortgage at the current rates (7.5%) to pay Robert for the house.

The assumable mortgage made Robert home stand out significantly compared to other homes for sale at that time, because it was offered with an assumable mortgage loan locking a lower rate for future buyers. This value can be worth up to $20,000 or more, and is usually divided between the seller and the buyer. If the seller takes all the value, his home becomes comparable, if the buyer gets all the value, then the seller is selling cheap and losing money.

When To Leverage an Assumable Mortgage

When assumable mortgages are worth your notice? Now at 2011 when future rates are expected to be higher than current rates, there is a real incentive and value for such mortgages.

The sub-prime crisis has caused the national mortgage interest rates to fall to their lowest rates ever. But that will not be the situation forever, the mortgage interest rates will rise, and will reach their former rate of 7% or even more within a few years. So obtaining an assumable mortgage and locking a low 5% rate now may be worth thousands of dollars somewhere in the future, when you may want to sell your home!

Lenders Dislike Assumable Mortgage Loans

First of all, regular lenders and banks do not like the assumable mortgages, for them it is a ‘lose’ situation. The lender does not gain any thing from the fact that the new buyer gets the mortgage in the same low rates. They prefer to provide new home-buyers with a new mortgage with current (higher) rates.

So most lenders block this option from the borrowers and prohibiting assuming mortgages by adding a term to the contract that the when the property is sold the mortgage must be paid off in full. So the seller needs to pay off all the mortgage left on the house with the cash they get from the buyer, and the buyer will need a new mortgage to be able to pay the whole sum in one lump.

In case the lender allow assuming a loan they will charge a fee assocciated with an Assumable Mortgage to cover the documentation, and recording of the transfter. In some cases they will change the terms or even the rates and try and lock the current rates.

Why To Refinance 2011 - FHA Assumable Mortgages

Most regular mortgage lenders would not be too thrilled to allow you to transfer the mortgage somewhere in the future. VA (veterans affairs) loans can be assumed too, but you have to be a veteran to apply for those. But there is a loophole, FHA backed mortgages are still allow assuming them when the home is being sold.

The seller would need to be able to meet all the FHA mortgage requirements and FHA minimum credit score requirements and show the lenders they are qualified for a mortgage. But once the buyer has been approved the mortgage can be transfered and the buyer assumes the mortgage with all the liability at the closing.

If you have any other mortgage, with high interest rates, then refinancing may be the best thing to do. See these 5 reasons why refinancing may be a mistake. If non of the reasons apply to you, then refinancing may be a sensible option. Refinancing to FHA assumable mortgage, is actually the only option for an assumable mortgage.

Assumption Mortgages Refinanced Conclusion

Because the only option for mortgage interest rates now is to get higher… and the best way to save your option to sell your home and get a better price for it, is to sell it with an assumable mortgage with it. Now at 2011 when all the lenders block this option, you can get such mortgages by refinancing to FHA assumable mortgages.

You will be saving money by reducing your mortgage monthly payments or reducing the mortgage terms. You will be holding a ‘profitable share’ when interest rates will sky-rocket in few years. You could either raise your home price and still have a lucrative asset people would want to buy, or keep your home comparable and get a higher down-payment as part of the value the buyers enjoys. In any case refinancing to a FHA assumable loan is worth the time and effort.

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What Is An Assumable Mortgage Loan – Read All About It

If You See An Assumable Mortgage – Grab It

People are asking what is an assumable mortgage ? What does an assumable mortgage do for me? What are the main benefits of such mortgages and what are the pros and cons of assuming a home loan. The assuming mortgage markets has three sides the seller side and the buyer side and the lender side. In this short review you can read more on assumable home loans and their pros and cons on each of the parties involved.

What Is An Assumable Mortgage

Assumable mortgage is when the seller sells the home together with the mortgage liability on the property to the buyer.

This financial situation will be beneficial to all sides (except the lender..) when the seller has a low mortgage rate on the home, and the current market rates are much higher. The buyer if he wants to buy the home, he will need to apply for a mortgage at current market rates, which may end up in an expensive mortgage and high payments.

Because the seller sells the home with the mortgage on it to the buyer, the lenders looses the delta between the seller rates and the current rates.

For example: If a person buys a home and took an assumption mortgage at 5%; a few years later the mortgage rates rise up to 8%. When the seller will want to sell their home, the buyer can either apply for th current 8% mortgage, or buy the home with the existing 5% mortgage left on it.

In this example, the seller will be able to sell their home in no time! Because the home has a huge incentive value to it; in some cases the seller will be asking for a price higher than the market value to benefit from the assumption mortgage added value. The buyer has an incentive to buy the assuming mortgage, and they will save 3% on the mortgage interest and saving on all the settlement costs on a new mortgage.

If it is so lucrative… Where is the sting?

Lenders Don’t Like Mortgage Assumptions

The only side loosing from such deals are the lenders. So they have an incentive to block such assuming loans from rolling between the seller and the buyer. Most lenders will block any option for such assumption mortgages by lenders have inserting due-on-sale clauses in their notes.

This means that when you get the loan you sign that in case you sell the home in the future you must pay off all remaining mortgage left on the home before the liability is moved to the buyer. With these due-on-sale clause most lender block their future losses if the interest rates rise.

Some lenders will allow the mortgage assumption, which will save some of the mortgage costs, they usually allow the mortgage loan assuming that the interest rate will be current as the market rate at the time of the new transaction between the seller and the buyer. Of coarse this takes the value from the assumed mortgage loan, if the rates are raised than the buyer has no incentive to get the home with the mortgage on it.

Remember that the buyer will need to pay the seller all the equity built on the home usually as down payment. On top of the large down payment the buyer will be forced to pay a high (current) mortgage rate to the lender.

All except the FHA and the VA loans. The FHA mortgages are assumable mortgage loans allowing the seller to assume that future rates will rise, and to sell the FHA backed mortgage to the buyer with the lower rates as a bundle deal.

FHA Assumable Mortgage Loans In a Nutshell

What is an FHA assumable mortgage loan? these types of home loans are still available today, and they can be a smart investment because the national mortgage rates are near the lowest point they have ever been. This means that as a buyer you buy a low interest rate and also the knowledge that in the future you could sell your home at higher price (the assumable mortgage has value!). The assumable FHA mortgage loan may cost some more because of the insured mortgage fees, but this is probably worth the price as this mortgage could be sold later on with a home at a higher market value.

The FHA assumable mortgage loans are valuable when the seller wants to sell their home in the future. In order for the buyer to be able to get the assumable mortgage loans, the buyer will need to qualify as regular FHA home mortgage borrower. If they meet all the minimum FHA requirements, the mortgage could be transfered to the buyer and all liabilities on the home are passed together with it.

There are several ways to calculate the value of the assumable mortgage loan to the buyer and to the seller, as they will both want to benefit from the value this kind of home mortgage holds in the unstable markets ahead. These calculations include the saving on settlements costs and fees, savings on the mortgage rates, and on the investment value of the savings from the assumable mortgage loans for the time the buyer plans to stay at the new home.