Assumable clauses

The assumable mortgages are virtually non-existent in residential real estate. You will be looking for the unicorn. Even if such properties with assumable mortgage do exist, the seller will definitely advertise it and also jack up the price due to the huge demand., so it's probably a wash.

Thanks. Figured as much or there would be more about them online but had to ask.

I just had buyer clients assume a seller's mortgage so they wouldn't have to pay mortgage recording tax, or whatever that tax is. The formula is that the buyers pay the attorneys (there's a bank attorney involved) and then the tax savings is split 50/50% between buyer and seller.

The assignment takes a few weeks to get approved, but at the high end it makes sense.

However, if you're buying a one- or two-bedroom, and you're looking at a million-dollar-mortgage, you've got, what $19K of tax savings? I don't know what the attorneys got paid, but it was certainly something, and so ... it would be a lot of work to do to save, say, seven thousand bucks. (And I live in a world where seven thousand dollars is not nominal to me.)

So it's not impossible, but we don't see it very often.

ali r.
{upstairs realty}

Ali, What you seem to be taking about is CEMA process to save mortgage recording tax. However, my understanding is that this is just tax saving but the actual mortgage rate doesn’t get transferred.

If buying coop, there is no mortgage recording tax to begin with.

Indeed. So CEMA process is used for Condos and Single Family only.

Ali, I don't think the point is to avoid the tax. I think the goal is to assume a 3% mortgage in a 7% rate environment and get $40k savings per year on a million dollar mortgage.

Woodside, CEMA only avoids the tax as almost all resi mortgages are not assumable in NYC as you said above.

Of course if it worked everyone would be doing it and there would be more movement in the market. I'm a newbie to everything real estate so...

My interet was just based on something I read at Bankrate and some recent Economist articles. The Bankrate article said the bank still has to sign off on the transfer and that sometimes you'll pay at a slightly higher rate than what the previous owner was paying. And of course you have to pay the previous owner whatever they've accrued in equity.

Anyway, clearly a nonstarter (duh) but I had to at least ask

Forgive my slowness ... but to answer the original question, I've been doing this for nearly two decades and I've never seen an "assumable" mortgage the way it's being described.

Did someone at Bankrate make this up?

What on earth would be in it for the bank? If it's a 7% rate environment, they're going to be offering 7% mortgages, right?

A conforming mortgage is not assumable, but I believe there exist mortgage types that are:
https://www.lendingtree.com/home/va/assumability-of-va-mortgages-when-you-buy-or-sell/

I did this when I bought my apartment 20+ years ago, and as others point out the reason was not just avoiding the recording tax, but also to take over the lower rate. I did not share anything with the seller, and none of this was advertised. I had to pay some fees to the bank. Not sure how feasible this is these days when the mortgages are all broken up and sold. I think the incentive back then for the lender to do this was that I took out a separate, much larger, loan from the same lender to cover the balance of the purchase price.

sport, What was the difference in rate between existing and new mortgage and remaning duration? I assume your credit was better than the seller.

I have heard of this magical mystical feature of an assumable mortgage- but have never seen one in real life. Purchase CEMA's on the other hand are at least somewhat common- but that's not what you are referring to. I do know that VA and I believe FHA loans may still be assumable- but these are very uncommon mortgages in Manhattan. I know one of my mortgage guys had commented to me just before Covid hit that he had just done his first VA Mortgage in Manhattan after doing this for more than 20 years in Manhattan. It's done- but not a common mortgage tool here.

VA mortgages are incredibly advantageous and I know several vets that buy a house like every 2 years (and typically rent out the prior one), utilizing this lifetime benefit to build a real estate empire. One could look for a veteran seller, but I am sure there are not that many in Manhattan.

How about assumable can openers?

30, ha ha

Everybody else, while "in theory" you could use a VA loan to buy a co-op, 1) for much of the past you couldn't, so there probably aren't that many out there, as US has noted and 2) most co-ops are going to have far tighter DTI than the VA will, so the limits on what you could get through would be narrowed.

Most coops have much tighter DTI than any bank or loan provider in general.

I am not saying there are such Manhattan coops for sale out there, I am just replying to the original prompt and to people saying bankrate "made up" assumable mortgages.

MTH could be looking for a condo or a townhouse.

>> What on earth would be in it for the bank?

Nothing. Assumable fixed rate mortgage makes little sense from business/market perspective, but it is just a (potentially overly generous) work benefit for people that risked their lives by joining the US military. Vets that play VA loan game probably not buying coops for many reasons. For example, they typically live in a place for a few years, then rent it out and buy a new place for themselves, but this would not be possible with a coops because of subletting restrictions.

There was also another thread about Denmark mortgages that were also assumable probably due to govt regulation. I asked some questions but not sure I got the answers on how factors like individual creditworthiness are taken into account in Denmark.

Oof! Desole tout le monde. Here's the correct linky:

https://www.bankrate.com/mortgages/assumable-mortgages/

Based on what I've learned on the SE forum I'm not investing in this startup :D

https://www.wsj.com/personal-finance/mortgages/a-3-mortgage-rate-in-a-7-world-this-startup-says-it-can-do-that-6afa85aa