There are many options for financing your Bethesda home, from the more traditional loan route to seller financing, and more. Read on for the low-down on one creative financing option: the assumable mortgage.
The Basics of Assumable Mortgages
An assumable mortgage is a mortgage held by the seller that can be taken over by the buyer when a home is sold. While an interesting option, this option is less popular than it used to be. These loans are hard to find because most lenders stopped voluntarily writing them many years ago.
The Benefits for Closing Costs and Interest Rates
So why are these loans appealing? For starters, there are generally few closing costs with an assumable loan. Plus, an assumable mortgage may be attractive if the interest rate on the existing loan is lower than the rate the buyer could otherwise get on a new mortgage, either because of current market conditions or the buyer’s poor credit history.
To determine whether to assume an old loan or apply for a new one, pay close attention to the possible assumption fee, usually one point, and other terms of assumption set forth in the existing loan.
A Word of Caution for Home Sellers
While an assumable mortgage can speed up the property sale, sellers should be careful about letting a buyer assume their mortgage. Depending on the state and terms of the mortgage, a seller may remain liable for the loan until it is paid off in full. Or the lender may go after both the seller and the buyer if the loan is not paid.
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