Assumable Mortgages in a High-Interest Market: Are They Really Your Best Bet?
So, you're on the house-hunting journey, and you've stumbled upon the idea of assumable mortgages. It's a tempting proposition, especially when the current interest rates are up, and the assumable loan's rate is as low as it gets.
But before you dive headfirst into this seemingly enticing opportunity, let's take a moment to consider whether an assumable mortgage is truly the best financial move for you.
Qualification Requirements: The Not-So-Sweet Spot
Assumable mortgages often come with stringent qualification requirements. You may find that it's more difficult to meet credit and income requirements for an assumable loan your own mortgage.
Due-on-Sale Clause: A Looming Uncertainty
One of the lurking shadows of assumable mortgages is the dreaded "due-on-sale" clause. It allows the lender to demand full loan repayment when the property changes hands. In a high-interest market, you don't need the added uncertainty. Going the route of your own home loan means you'll have control and peace of mind.
Limited Negotiating Power: Locked into the Past
Assuming a mortgage means you have limited ability to negotiate loan terms and take on all the terms set by the previous homeowner. However, when you secure your own mortgage, you can negotiate for better terms and have more options as to which loan program suits you best.
Additional Costs: Fees and Surprises
Assumption fees and application fees can add to the expenses of assuming a mortgage. Don't forget about potential surprises like repairs or maintenance costs that might come with the property. These additional costs can quickly erode the assumed rate's benefits.
Playing the Waiting Game: Finding a Willing Seller
Assumable mortgages sometimes come with a risk to the seller. For example, they may still be held liable if you default on the loan. For that reason, it's challenging to find a seller that's willing to do an assumable mortgage. In a real estate market that's already challenging, putting additional conditions on your house hunt could mean waiting an extraordinarily long time.
While assumable mortgages might seem like an attractive option, they come with potential downsides. Securing your own mortgage --even at a higher rate --allows you to have more control, negotiation power, and the ability to purchase your home much sooner!
Let's work together to make it happen.