Mortgage loans are not just traditional anymore. One of the top 5 trends we’re seeing in the Portland market right now is assumable loans. A once-popular strategy when rates skyrocketed in the 1980’s, assumable loans allow the buyer to assume the loan of the seller to purchase the home.
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The obvious advantage of this is getting a mortgage with a lower interest rate than the interest rate currently available. However, another benefit is that the buyer inherits the place in the loan payment, which includes the amortization of the loan. This results in a greater net benefit to the buyer.
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Getting an assumable loan is a complicated and lengthy process. If the home has increased in equity since the loan was granted to the seller, you – as the buyer – have to come up with the difference or take on a piggyback 2nd mortgage. This also means you have to be able to afford a higher downpayment, such as 10%. Another potential disadvantage is that you can only apply with the lender who issued the loan, so if you have a preferred lender, they will not be able to work on that loan for you.
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Overall, assumable loans are a strategy that can be a good fit for the right buyer and seller. We are hearing more people being open to exploring this as an option as of late! Check out the video below for all the details!
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If you want to learn more loan types and the home buying process check out our Buy like a Pro page on our website!