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When It's Safe to Assume

You know the old saying when you assume something? You make an ASS out of U and Me.. lol classic dad joke. I like that one. It's usually spot on. Not always.


Last week we talked about portable mortgages and this week I wanted to discuss assumable mortgages.


With interest rates higher than they've been in years, the discussion of assumable mortgages has come back as a way for a buyer to essentially take over the mortgage from the seller at their presumed lower rate.


For example, if a seller bought two years ago and has a sub 2% interest rate with three years remaining on their term, the new buyer may be able to assume their mortgage and take advantage of that much lower rate. The same qualification process takes place and that buyer would have to carry out the mortgage terms with that specific lender but it does provide an attractive option.


What about the seller?


In most cases, when you sell your property, it's likely because you're moving to a new one where you'll need a new mortgage anyways. This is where mortgage portability comes into play (see my last email). However if you're selling and not buying again, having a mortgage that can be assumed is a HUGE advantage.


The first advantage is you save THOUSANDS of dollars in break penalties the lender will charge you if you were to otherwise sell and pay off your mortgage before the end of your term. This is reason enough to want an assumable mortgage.


The second advantage is the added benefit to your listing when trying to stand out from the other homes on the market. As we move into a balanced market and homes take a little longer to sell, offering your property with an assumable mortgage (at a much lower rate) can be quite attractive to a new buyer.


More times than not (but not always the case), that property has gone up in value and the buyer would have to "top up" that mortgage to meet the requirements of the new sale price and be left with a blended rate, but they would be able to take advantage of the lower rate on the majority of the mortgage value.


Lots to consider when taking on a new mortgage and interest rates are just one part of the story. Make sure you reach out if you need recommendations on where to go for a great mortgage. I'd be happy to point you in the right direction!

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