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Low-Interest Rate Assumable Mortgages... will it halt future price drops?
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2011 Apr 26, 3:13pm 1,178 views 4 comments
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terriDeaner
2011 Apr 26, 3:22pm
Assumable loans are not prevalent at all, especially not at a time of historically low rates.
In your experience, how often are fixed-interest loans assumable?
LAO
2011 Apr 27, 1:08am
Everyone talks about how bad that the majority of mortgages are FHA loans since 2008..... Since these are all assumable mortgages then rising interest rates for the vast majority of future FHA sellers should have little negative impact on their sale price. And i wouldnt put it past the govt to pass a law making all home loans assumable if high future interest rates put too many would be sellers underwater.
LAO
2011 Apr 27, 2:44am
In your experience, how often are fixed-interest loans assumable?
Well everyone has been griping about how all new loans under $749K are FHA loans... So, from estimates I've read... Since early-2008... 60%+ of the loan market has been ASSUMABLE FHA loans.. Meaning when interest rates rise.. 60%+ of the market won't have to worry too much because when they want to sell in 10+ years, even if rates are 20%... they can offer the buyer their 4.5% assumable loan in the sale process. The buyer will have to come to the table with a larger downpayment or get a 2nd loan for the difference at a higher rate.. But a good chunk of their loan will be low interest.
I was reading about the ability to transfer your low interest mortgage rate to a buyer in the future.. say maybe 5-10 years from now when interest rates are 8-10% or higher!
I'd never heard of this before, but apparently FHA and a lot of conventional Freddie/Fannie loans allow the buyer to "assume" the interest rate of the seller. I could see this as a tactic that the government could use to keep home prices from crashing long after interest rates rise.
Say I buy a home at 4.5% interest rate now.. and want to sell in 10 years when interest rates are 10%. Many people are arguing decreased monthly affordability would hamper any transaction from seller to buyer without a steep drop in price. If I can transfer my 30 year 4.5% mortgage to the buyer then that would change things! Buyers mortgage would be the same as mine, and their inflated dollars would be able to afford more also.
Anyone know how prevalent "Assumable Mortgages" are in the wild?
#housing