Mortgage Rates Skyrocketing? Here's How to Beat the System

Sometimes you have to think outside the box.

The trend of buyers assuming the current homeowner's mortgage at a low rate is being driven by the recent rise in mortgage interest rates. In September 2023, the average interest rate for a 30-year fixed-rate mortgage is 7.57%. This is significantly higher than the rates that many homeowners obtained in recent years, when rates were below 3%.

For buyers who are looking to purchase a home, assuming an existing mortgage with a lower interest rate can be a very attractive option. This can save them thousands of dollars each year on their monthly mortgage payments.

There are a few things that buyers and sellers need to know about assuming a mortgage. First, not all mortgages are assumable. Only certain types of mortgages, such as FHA, VA, and USDA loans, are typically assumable. Second, the buyer must still qualify for the mortgage in order to assume it. This means that they will need to have a good credit score and a sufficient down payment.

Finally, there may be some costs associated with assuming a mortgage. These costs can vary depending on the lender and the type of mortgage. However, they are typically lower than the costs associated with obtaining a new mortgage.

Recently, a real estate startup company, Roam, starting offering listings of homes for sale with assumable mortgages.

Here are some of the benefits of assuming a mortgage with a lower interest rate:

• Lower monthly mortgage payments: Buyers can save hundreds of dollars each month on their mortgage payments by assuming a loan with a lower interest rate. This can make it easier to afford a home and free up money for other expenses.

• Shorter repayment term: Buyers may be able to repay their mortgage sooner if they assume a loan with a shorter repayment term. This can save them money on interest in the long run.

• Increased equity: Buyers who assume a mortgage with a lower interest rate can build equity in their home more quickly. This is because they will be paying more of the principal balance of the loan each month.

Overall, assuming a mortgage with a lower interest rate can be a great way for buyers to save money on their home purchase. However, it is important to weigh the pros and cons carefully before making a decision.