Why Assumable Loans Are Great
If you are refinancing or modifying your loan, then I recommend doing what you can to ensure that it is assumable. An assumable loan means someone else can acquire your mortgage (and make payments on it) when you sell the home.
Assumable loan clauses are standard in VA and FHA mortgages, so if you are considering making a change, take a very close look at those programs.
Why look for an assumable loan? Because interest rates are not going to get any lower. In this author’s mind, inflation is just a few short years away, bringing with it higher interest rates. Higher interest rates mean loans are more expensive, and people are not able to buy the size of home they could if rates were lower. You know that your payments are less if your rate is 4% versus 8%. Someone looking to buy your home will be looking at it a lot differently if they have to pay 4% or 8% interest. The difference on a $100,000, 30-Year loan is $403.66 per month. That’s a lot of money.
Getting an assumable loan now at market rates means you can lock in that savings for someone looking to buy your home later, when rates are higher. Because someone assuming your 4% loan will save $403.66 more to spend each month than he would getting a market rate, he should be willing to pay a premium for your home. After all, he’s saving $4,843 per year by taking over your mortgage, or $48,439 over ten years. That means your home is worth more than the next guy who did not think to secure an assumable loan while rates were low.