What is an assumable home loan? This pertains to the transfer of a home loan from the current home owner to a new owner. For some, the interest would be the same or to a new rate. For instance, when John Doe bought a house for half a million dollars at a fixed interest rate of 6% for 5 years and you had a good deal with him to buy the house, then you can assume the house by paying the outstanding balance of the loan as well as other obligations under the same contract loan.
Now, you may be asking how you can make a lot of money out of an assumable home loan. Well, this can be a good investment like buying and then selling it. How this works? When you are interested to purchase a residential house for your family or for future sale, buying an assumable home loan can be a good choice. Take the advantage of investigating or searching for desperate sellers. Those desperate sellers mostly are those whose property is nearing to be foreclosed because of inability to pay the mortgage debt. When this happens, you can make a deal to purchase the home and assume his debt. It may be possible that the house may have depreciated in later years, but it doesn’t follow that the value of the house has gone lower the debt. With that, you are able to purchase an ideal and nice revenue fringe intact, plus you are able to save John Doe with the foreclosure.
The real thing of making money with an assumable home loan is sparing you from high interest rates. In a clearer example is that, when loan rates have gone high when the seller bought the house, the assumable loan rate will follow or even lower compared when you take a new mortgage and at the same time you will not be paying too much charges or fees. Moreover, most of the monthly payments of the assumable home loan will proceed directly to the principal and not on the interest since the old owner have been paying the house the term of the loan will be diminished.
For prospective buyers, it is really advantageous and beneficial to hook on assumable home loans as he will only be responsible based on the original rates.