Assumable mortgages could make homes easier to sell and cheaper to buy.
An assumable mortgage is when a buyer takes over a seller’s existing mortgage, which is becoming more and more popular.
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Nick Gibson with our sister station WJAX in Jacksonville talked to Timothy Newman, the president of North Florida Mortgage Brokers, about how these mortgages work.
“An assumable mortgage is basically when a buyer takes over a seller’s existing mortgage, including the monthly payments, interest rates, loan amount, and loan terms,” Newman said.
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Assumable mortgages have been nearly non-existent since the 1980′s, Gibson reported.
Newman told Gibson that there is an equity gap that comes with these mortgages that people should know about.
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“Say the loan amount that you are assuming is $200,000, but the purchase price is $600,000, you now have a $400,000 equity gap or assumption gap that must be paid in cash,” Newman said.
Newman told Gibson that these mortgages are only good for the right person to apply for.
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“For a buyer, this is an option or strategy to potentially get a lower-than-market monthly payment,” Newman said.
However, Newman warns against first-time homebuyers using this strategy.
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“If you’re a first-time homebuyer and you don’t have a large down payment, an assumable mortgage isn’t the best option for you,” Newman said.
The September market statement from the Northeast Association of Realtors shows that the region is moving from a seller’s to a buyer’s market.
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These loans, according to Newman, are perfect for the direction the market is moving.
“Affordability is what’s turning the tide for a seller market to a buyer market right now, and a solution like an assumable mortgage is a way to even the playing field,” Newman said.
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