The Newest Home Seller Offering: Old Interest Rates

  • June 12th 2023

by UrbanTurf Staff

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Mortgage Rate Chart_12-10-20.jpg
Mortgage rates at the end of 2020. 

The steady rise in long-term interest rates over the last 12 months is leading some home sellers to offer a bonus for buying their home: a very low interest rate mortgage. 

The New York Times published an article over the weekend that takes a closer look at this interesting trend. Specifically, sellers are offering to transfer their 2.5%-3.5% interest rate to the eventual buyer. 

"An emerging cadre of investors and real estate agents are trying to, in effect, sell mortgage rates from several years ago by transferring them to new buyers," the article states. 

In a world of 6.5% interest rates, the idea of assuming a low rate from years ago is appealing, however not necessarily easy. For one thing, while mortgages backed by the Federal Housing Administration, the Department of Veterans Affairs and the Department of Agriculture typically are transferrable, most conventional mortgages are not. Second, complications arise when accounting for how much of the mortgage the home seller has already paid down. 

From The New York Times article:

"Consider a homeowner who has a low-rate mortgage but has paid a chunk of it down: To assume the loan, a buyer would have to come up with a large down payment to account for the seller’s equity."

While it will be interesting to follow along to see if listings regularly start to offer this option, it seems as though some area listings already are: the Times article begins with a DC condo owner who sold his unit offering his assumable low interest rate mortgage. 

This article originally published at https://dc.urbanturf.com/articles/blog/the_newest_home_seller_offering_old_interest_rates/21127.

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