(PRWEB) January 05, 2005
Everyday a new mortgage type gatecrashes into the arena. This is an attempt to get you familiar with those entrants. Here we will be analyzing - assumable mortgage.
Have you ever dreamt of selling off your mortgaged property?
Then assumable mortgages provide you the opportunity to sell your property whose loan is not yet cleared. You can transfer the mortgage to a potential buyer.
Wondering who would take this unlikely risk of buying a pledged collateral?
The buyer inherits the old interest rate as well. This is what draws in the crowds. With the market rates increasing every day, it is the least expensive alternative for a new loan.
What is in it for the buyers?
They get a lower interest rate and thus lower monthly payments relative to the market. They can avoid the settlement costs on a new mortgage. But they must be responsible for the lien as well as other obligations henceforth.
The buyer must estimate the following before agreeing to the terms of an assumable mortgage.
- Difference between the rates of the seller and the current rates
- The amount of loan balance
- The term for the earlier mortgage
- The period you are hoping to opt for
The closing costs also include only the appraisal fees and title insurance.
What about sellers?
If the seller declares his property as assumable, he can sell it off easily. Rather than selling off the house and paying from the proceeds, you can transfer the mortgage at a higher price. Sometimes the seller remains liable to the mortgage usually secondarily. Then you will be overburdened and cannot take a new mortgage.
The lenders are at an utter loss because they cannot charge the current rates .Today they have an option of adding a due-on-sale clause (except in FHA and VA loans). This prevents them from changing the status to assumable property.
With interest rates climbing in the market and many mortgagors in the last leg of 25 or 30 year mortgages, assumable mortgage has become a viable option. Weigh your options properly before opting for this mortgage.
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