top of page
  • Writer's picture Treavor Dodsworth CFP®, CPA, CKA®

#140 - I'd Like Your Home... and Your Mortgage


I'd Like Your Home... and Your Mortgage

Mortgage rates have risen very quickly. Per this Y Charts historical chart, 30yr mortgage rates were 5.78% as of 6/16/22 compared to less than 3% a year ago.


This means a $300K 30yr mortgage will have a payment of roughly $500 more per month if you purchase now compared to a year ago. A $500K 30yr mortgage will have a payment of more than $800 more per month if you purchase now compared to a year ago.


Given that rates were low for a prolonged period and now have risen quickly, many home sellers currently have a mortgage with a lower interest rate than a new buyer could get by taking out a new mortgage.


This made me wonder - “Can a new buyer just take over the seller’s mortgage?” I found out it actually is possible in some situations.


If you currently own a home and look at your closing disclosure there should be a question about assumption. Our's reads like this - “If you sell or transfer this property to another person, your lender” and then two options either “will allow, under certain conditions, this person to assume this loan on the original terms.” or “will not allow assumption of this loan on the original terms.”


In other words, it is actually possible to transfer your mortgage to another person in some situations.


I’ll be honest, I know very little about this but it is at least worth an ask. The impact of this would vary dramatically but could easily be $100K+.


On the seller side, if your current mortgage is assumable that may make your property more attractive. On the buyer side, if you can assume a mortgage with a much lower interest rate your costs could be substantially lower.


Make sure to discuss all pros and cons with your lender. Also, if you are the transferer, make sure to follow the necessary steps so that you are no longer liable for the mortgage upon transfer.

 

Investopedia - Assumable Mortgage

 

Thank you for reading!

Thanks! Message sent.

All written content on this website is for information purposes only. Opinions expressed herein are solely those of Sycomore Financial, unless otherwise specifically cited.  Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. The owner of this website takes great care to thoroughly research the information provided to ensure that it is accurate and current. Nonetheless, the content on this website is not intended to provide tax, legal, accounting, financial, or professional advice, and readers are advised to seek out qualified professionals that provide advice on these issues. All information or ideas provided should be discussed in detail with an advisor, accountant, legal counsel, and/or other pertinent professionals prior to implementation. In addition, the owner cannot guarantee that the information on this website has not been outdated or otherwise rendered incorrect by subsequent new research, legislation, or other changes in law or binding guidance. Neither Sycomore Financial or it's owner shall have any liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website. In addition, any advice, articles, or commentary included on this website do not constitute a tax opinion and are not intended or written to be used, nor can they be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. Any mention of an investment product or solution is not a recommendation to buy or sell. ETFs that are mentioned may not accurately reflect the market segment mentioned. Past performance is not a guarantee of future results. Any mention of rates or return should not be seen as a guarantee those rates or return will be received.

bottom of page