Blog > Unlock Savings: The Power of Assumable Loans for Home Buyers

Unlock Savings: The Power of Assumable Loans for Home Buyers

by Thomas J. Morillo

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In the current real estate market, high mortgage interest rates can be a significant barrier for home buyers. However, there’s a strategic way to save big: assumable loans. By assuming an existing mortgage with a lower interest rate, buyers in Saint Petersburg and the Tampa Bay area can enjoy substantial financial benefits. Here’s how it works and the savings you can expect. 

What Are Assumable Loans? 

An assumable loan is a mortgage that a buyer can take over from the seller, keeping the same interest rate and terms. This can lead to significant savings, especially in a high-rate environment. 

The Financial Benefits 

To illustrate the savings, let’s consider a home with a purchase price of $500,000, an assumable mortgage balance of $380,000 at a 3% interest rate, and current interest rates at 7.3%. The buyer would need to cover the remaining $120,000 either with cash or a secondary loan. 

Example Scenario 

  • Purchase Price: $500,000 

  • Assumable Mortgage Balance: $380,000 at 3% 

  • Current Interest Rate: 7.3% 

  • Gap to Fund: $120,000 

Monthly Savings Breakdown 

  1. Assumable Loan: 

  • Mortgage Amount: $380,000 

  • Interest Rate: 3% 

  • Monthly Payment: Approximately $1,602 

Second Loan: 

  • Loan Amount:  $108,000 (90% of the $120,000 gap) 

  • Interest Rate: 7.3% 
  • Monthly Payment: Approximately $741 
  1. Total Monthly Payment with Assumable Loan: $2,343 

Non-Assumable Loan Scenario 

  • Mortgage Amount: $500,000 

  • Interest Rate: 7.3% 

  • Monthly Payment: Approximately $3,438 

Monthly Savings 

  • Total Monthly Savings: $3,438 - $2,343 = $1,095 

Overall Savings Over 30 Years 

  1. Assumable Loan Total Cost: 

  • Assumable Loan (3%): $577,046 
  • Second Loan (7.3%): $266,760 
  • Total Cost: $843,806 

Non-Assumable Loan Total Cost: 

  • Standard Loan (7.3%): $1,236,786 
  1. Overall Savings Over 30 Years: $1,236,786 - $843,806 = $392,980 

The savings are clear: by assuming a lower interest rate mortgage, buyers can save nearly $400,000 over the life of the loan! 

How the TJM Home Team Can Help 

At Thomas J. Morillo and the TJM Home Team, we work with Lender Specialists who can help fund the gap between the assumable mortgage balance and the purchase price. We can secure financing for up to 90% of this gap, ensuring you can capitalize on the benefits of an assumable mortgage. 

Ready to unlock these savings? Text us at 727-560-4944 for more information on how assumable loans can benefit you in the Saint Petersburg and Tampa Bay markets. šŸ“žšŸ”

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