Posted on: 07th Jan, 2005 11:31 pm
The interest rates are inching upwards everyday. This will help the buyer to acquire a cheap loan, because he inherits the interest rates of the seller as well. So, he gets to pay at the old reduced rate rather than the current rate and so saves on monthly payments. Apart from this, the mortgage settlement costs are also considerably reduced. But the lawyer needs to fulfill the qualification criteria of the lender for that loan type.
Does the seller stand to gain?
The seller gets to avoid the mortgage payments. He could have sold the property and paid the loan balance from the proceeds. Here he sells the property at a higher price. The declaration of assumability itself helps the property sell faster.
Who would not like to take this opportunity?
A new mortgage would be expensive. The savings from the mortgage are usually shared among the seller and the buyer. If the house had been mortgaged for long, the equity build up will cause a huge difference between the loan and the sale price. This will decrease the savings. The buyer is to pay this difference.
Poor lender! The lender is the worst affected, because he cannot charge the current interest rate from the buyer. Earlier the lender had no provision of stopping 'assumption'. The scenario has changed, today the lender gets to include 'due-on-sale' clause. This clause state that at the time of foreclosure, the property must be sold and the proceeds must go into paying off the loan. It also provides the option for assumability only if the rates are allowed to be raised as per the market rates. This clause does not apply to FHA and VA loans.
Assumable mortgages need to be opted with a foresight. The lender attitude and his history need to be looked into, the disclosure statements must be read thoroughly before signing. You must make it a point to read the closing documents of the seller, after all its all inheritance and you should get the best choice the right way.
Related Forum Discussion
Does the seller stand to gain?
The seller gets to avoid the mortgage payments. He could have sold the property and paid the loan balance from the proceeds. Here he sells the property at a higher price. The declaration of assumability itself helps the property sell faster.
Who would not like to take this opportunity?
A new mortgage would be expensive. The savings from the mortgage are usually shared among the seller and the buyer. If the house had been mortgaged for long, the equity build up will cause a huge difference between the loan and the sale price. This will decrease the savings. The buyer is to pay this difference.
Poor lender! The lender is the worst affected, because he cannot charge the current interest rate from the buyer. Earlier the lender had no provision of stopping 'assumption'. The scenario has changed, today the lender gets to include 'due-on-sale' clause. This clause state that at the time of foreclosure, the property must be sold and the proceeds must go into paying off the loan. It also provides the option for assumability only if the rates are allowed to be raised as per the market rates. This clause does not apply to FHA and VA loans.
Assumable mortgages need to be opted with a foresight. The lender attitude and his history need to be looked into, the disclosure statements must be read thoroughly before signing. You must make it a point to read the closing documents of the seller, after all its all inheritance and you should get the best choice the right way.
Related Forum Discussion
I own to investment properties, I'm losing money every month, I'm working with to potential buyers, but they don't have money for down payment or to show the bank i just want to get rid of them, wish is the best way to do it quit claim :idea:
Hi Joej,
If you wish to transfer your investment property to someone else, you can use a quitclaim deed. By signing over the deed, you will be transferring your ownership of the properties to the other person.
If you wish to transfer your investment property to someone else, you can use a quitclaim deed. By signing over the deed, you will be transferring your ownership of the properties to the other person.