In my previous post Combatting High Mortgage Interest Rates – Blanchett Homes KC, I talked about what could help alleviate the pain of high interest rates for the first couple of years of owning a mortgage. What if I said there was an even better option, and that you could buy a home with a low rate mortgage from 2020-2022 that are between 2% and 3%? Well look no further, because thats what I’m going to cover in this article. Here’s an option you can use, but first a disclamer. In order to do this option it may require a significant amount of capital and will require finding a homeowner who is willing to allow you to assume their mortgage.

Home Loan Assumption

I have been looking around the local area in Kansas City and I am seeing a lot for sale by owner properties, and I have consistently seen these properties have the option to assume their loans at a 2.3% interest rate. These are extremely low payments for those who can get into them. I called my mortgage officer today and asked her how this works and this is what she explained to me.

A Home loan assumption is when someone assumes the loan at the current principle balance and at the current interest rate. In essense the person assuming the loan will just take over the payments and they would be the loan holder. Obviously there will be requirements and vetting that would need to be done with the mortgage provider prior to assumption. Here’s the main problem that home buyers will face.

Potential Pitfalls

The homes that have a 2.3% interest rate will have a large amount of equity built into it so this would require home buyers to pay the sellers the cash difference when buying it. For example, if a seller wants to sell his home for $300,000 and the principle balance is is $280,000 the buyer would have to pay the seller 20,000 to cover this. Additionally, the seller would end up paying his own closing costs as well.

The Benefits

The benefits with this are obvious. Homebuyers get into a home that have historically low interest rates and don’t need to worry about an atmospherically high mortgage to pay each month.

Conclusion

If you want to secure a low rate mortgage and you’re frustrated with the cost of mortgages now consider this option when starting your home search.