This is a YouTube video titled "Assumable Mortgages" containing an explanation about the concept, benefits, and challenges of assumable mortgages. The speaker discusses how buyers can take over existing low-interest mortgages, the financial implications, and the limitations related to FHA or VA loans. The content was created on October 7, 2023, and focuses on real estate financing topics.
I've heard more and more about assumable mortgages lately, so I wanted to dive right in and give the good, bad and ugly. Now what this is. Let's say a buyer purchased their home a few years ago. They have a 2 or 3% interest rate and they have to move. So in order to entice new buyers to their home, they're saying, hey, I'll toss you the keys to my current mortgage. You could pick up where I left off, and you could have this great 2 or 3% rate, which is way better than what you can find today. That right there sounds amazing, but let's play it out. So let's say they bought their house for $300,000 back in 2020. On average, homes are up 35%. So that $300,000 house, now they probably want to sell for about 400,000 dol today's value. And they probably paid the mortgage balance down from 300 to about 280. So there's $120,000 difference here. This is where it gets a little sticky. You have to find an FHA or VA buyer because it's only for FHA or VA loans, not conventional, that has $120,000 in the bank. They could cover that difference. They could bridge the gap, because when you assume the mortgage, you also assume the current mortgage balance. So you only get the loan for 280, even if you're approved for it. Then you have to come up with $120,000 difference to get to the full sales price. Because I'm sure the sellers don't want to take $120,000 ha, the price of their home. That's the one in a million thing that makes it kind of tough to actually complete the whole process of assumable mortgages.
