Assumable Loans And Resale Value

Assumable Loans And Resale Value



Assumable Loans and Resale Value
The value of​ an​ assumable loan comes from two sources .​
It is​ often easier for the​ buyer to​ qualify when assuming a​ loan and the​ payments may be lower than for new financing .​
However,​ its value may be limited by two important factors .​
If the​ balance of​ the​ loan is​ much below the​ asking price,​ the​ loan may not be worth much .​
For the​ buyer to​ assume,​ either a​ large cash down payment is​ requited or​ additional financing will be needed .​
This extra financing may be a​ loan provided by the​ seller .​
Second,​ if​ the​ rate on​ the​ existing loan is​ close to​ or​ above the​ going rate,​ there is​ little advantage to​ assuming it.
How do you​ know if​ your loan is​ assumable? An FHA or​ VA loan is​ likely to​ be assumable .​
a​ conventional loan is​ not likely to​ be assumable .​
Look in​ your loan contract for a​ due on​ sale clause .​
If it​ is​ there,​ the​ lender has the​ right to​ call in​ the​ loan when you​ sell the​ home .​
There are assumable conventional loans that require a​ slightly higher interest rate.
If you​ have an​ assumable loan at​ an​ interest rate below the​ market,​ you​ should get a​ higher price at​ the​ sale .​
Remember that when you​ repurchase,​ you​ will have to​ pay more for financing .​
a​ higher resale price compensates you​ for giving up favorable financing.
How much is​ the​ loan worth? Consider that,​ since the​ loan payments are lower,​ the​ buyer could pay a​ higher price and still make the​ same payments .​
Say you​ have a​ home that is​ worth $100,​000 .​
You have an​ assumable loan for $70,​000 at​ 8% interest .​
There are 25 years left in​ the​ teim .​
a​ new loan for $70,​000 at​ the​ prevailing rate of​ 10% and 30 years requires a​ monthly payment of​ $614.30 .​
Your loan’s payments are $540.27 .​
The monthly savings of​ $74.03 would service a​ loan at​ the​ market rate over 25 years for $8147 .​
Therefore,​ a​ buyer who assumes the​ loan could borrow an​ additional $8000 and still enjoy lower payments than by using totally new financing .​
Whether you​ could extract this amount in​ the​ sales price depends on​ market conditions .​
However,​ the​ assumable loan provides an​ important sales tool in​ any market.
If you​ think you​ may sell your home in​ the​ near future,​ you​ may want to​ refinance with a​ new assumable loan at​ a​ relatively high loan-to-value ratio .​
This will provide a​ form of​ insurance in​ case interest rates rise or​ mortgages become hard to​ get when you​ do sell.
This article may be published freely as​ long as​ you​ keep the​ below credits:
Article by (Tommy Lee) .​
For more info on​ Finance and Refinancing Mortgage loans,​ visit www.smartrefinance.net




Related Articles:




Powered by Blogger.