Hot deals July 6, 2022

Could you still get a sub 3% mortgage in 2022? Exploring Assumable loans.

The housing market has finally cooled off after big interest rate hikes priced out many buyers. This shift in the market has given the remaining buyers more power to negotiate, ask for concessions, conduct thorough inspections and choose from a growing inventory of real estate. But with interest rates double the rate seen just 1 year ago today, buying is tough. What if there was a way to capture a sub 3% mortgage on a purchase today?

Assumable loans are a way for a buyer to obtain an existing loan term and rate from the current owner on their purchase. The buyer must still qualify for the loan and only certain loans (specifically FDA, USDA and VA loans) are assumable. This can be an attractive for both parties as the buyer may be willing to pay a premium price if he/she knows an attractive loan will come with it and the buyer may save money despite the premium price paid because of a drastically lowered interest rate compared to going market rates.

Example scenario:

Seller has a Townhouse listed at $425,000 in Provo. He obtained an FHA loan 1 year ago snagging a near record low 2.7 30 year fixed mortgage. He has 29 years left and owes 300,000. He works with the bank and is able to list the townhouse eligible for an assumable loan. Buyer tours the townhouse and makes an offer for full asking price if assumable loan is able to be obtained. Buyer works with Seller and the bank and inherits Sellers mortgage including the fact that just 29 years are left on the loan and the rate is only 2.7% . The buyer will at that point need to pay for the remaining $125,000 in cash or obtain an additional mortgage at the going rate for the remainder of the purchase price. Overall, a great deal for buyer and a huge help to seller in getting their desired selling price.

It’s becoming more common to see listings note that an assumable loan may be possible but many agents, sellers and buyers have never heard of an assumable loan. If you are a buyer looking for a sweet mortgage rate or a seller looking to get top dollar for your real estate, speak with a mortgage professional and see if an assumable loan could be a valuable tool in your real estate transaction.

 AJ is a licensed real estate agent in the state Utah and works with ERA Brokers Consolidated. He is BYU graduate and also works in Utah public schools as a school psychologist when he isn’t working on a real estate deal. AJ has personally built nearly 40k in passive income in the past 4 years from his real estate investments while working on an educator salary and would love to help you do the same. Call or text AJ at 435-619-3465 to talk real estate.