Hi there,
Looking into purchasing a house that is listed for $350,000 and indicates that an assumable loan may be available. What does this signify? For $200,000, the seller purchased the home in 2020. I have made an effort to research the meaning of the term, but it is not quite clear.
It seems like the Roam product might end up costing more with fees compared to getting your own loan, especially if you’re typically only eligible for VA or FHA loans.
I was curious about this, so I did some research:
Mortgage assumption allows a buyer to take over the original loan balance at the initial terms. However, it’s crucial to understand that this doesn’t include any home equity the seller has accumulated. If the property’s value has increased since the original loan was acquired, the loan amount may not cover the current value of the home, requiring the buyer to cover the shortfall.
For instance, if the seller owes $300,000 on a home they bought for $435,000, the buyer must provide $135,000 to compensate for the seller’s accrued equity.
Can I take out a loan to cover the equity when assuming a loan?
Yes. A home equity loan serves as a common second mortgage option for buyers taking over a mortgage and unable or unwilling to provide cash to cover the equity. Although this second loan typically carries a higher interest rate than the assumed mortgage, the principal amount required is much lower than that of a “first” mortgage.
Don’t ever assume anything. LOL, no pun intended.
The new buyer might assume the current mortgage with an assumable loan, frequently at the original interest rate. When compared to getting a new mortgage, this could save money. Nonetheless, the lender could still need to approve and run a credit check. In order to properly comprehend the terms and implications for this particular property, I would advise speaking with a real estate expert.