This mortgage hack could achieve an interest rate of 3% – but is it a good idea?

The evaluation of a low mortgage sentence has become a greater challenge in an environment with high inflation and high interest rate. Many home buyers have followed an almost mythical interest rate of 3% since the interest rates reached around 2.91% of historical lows from pandemic in the pandemic era in 2021 (for an average 30-year existing loan).

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While it is unlikely that buyers will see the interest rates nearby again, there is a possible mortgage hack that could bring them to an interest rate of 3%. This hack is known as an appropriate mortgage and excitedly excited at a time when houses may buy harder than ever before.

This is how it works and a few restrictions.

An assumed mortgage is if a buyer takes over the seller's existing mortgage under the original conditions (including the interest rate, the repayment period and the remaining balance. This enables the buyer to use a lower interest rate secured by the seller.

However, not all loans can be accepted. The good types of loan include state-supported loans such as those of the Federal Housing Administration (FHA), the Ministry of Veteran Affairs (VA) and the US Agriculture Ministry (USDA).

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The most obvious reason to accept a mortgage is that you can receive an interest rate that is not available through other financing, e.g. This can significantly reduce your monthly mortgage and interest rates that are paid for the capital over time.

Another advantage is that you may have lower final costs with a applicable mortgage if there are no new fees for assessment or loan promotion.

There are also advantages for sellers. Houses with applicable mortgages can attract more buyers in a sluggish housing market. The added value of a mortgage with low interest can also justify a higher price-price price-performance ratio.

Although this sounds like a fabulous deal, remember that it is not a magical solution. You still have to meet qualified criteria for a housing loan, e.g. B. good loans, sufficient income and a solid relationship between debts. The process itself could also be as strict as applying for a new loan.

The biggest restriction is that the buyer must cover the difference between the seller's mortgage and the current sales price of the home. Suppose a house sells 500,000 US dollars and the seller owes only 400,000 US dollars, the buyer has to bring $ 100,000 in cash -or a second mortgage, often to today's higher interest rates. Sometimes this can negate some or all savings of the low rate assumed.