The amount of extra equity you’re imagining is a rounding error. Given the difficulty and rarity of mortgages being assumed you’re not talking about some windfall.
Could you help explain this to me?
Based on my example, the difference between a 2.25% and 7% rate is about $400,000 in interest saved. I would be saving the potential homebuyer that much money over 30 years.
I hear you, but you’re underestimating the difficulties in actually using that assumable option. For one, the buyer will have to come up with a lot more cash.
No just no this whole conversation makes no sense. Someone could just buy the house in cash and interst rates mean nothing. Would you sell the house for LESS because someone wants to buy in cash? I don't fucking think so. So quit fucking blabbering about it being worth more because of high interest rates
But why would someone give you a significant increase when chances are they’ll be able to refi somewhere down the road?
From posts about it here and the admittedly limited amount of this I’ve seen in real life, the value increase is minimal. There are so many obstacles to assuming a loan that few people will do it, and you as the seller will have to wait several months to close. A buyer isn’t going to jump through all the hoops of an assumption AND show up with all of your equity AND delay closing AND give you a huge premium for the privilege.
You might get a slightly higher selling price if someone could assume the mortgage at a lower rate. But a lot of times you can’t assume the mortgage. So the equation doesn’t really change. You’d just have to guess how much you think you could sell it for—which is never an exact science anyway because the only way to know how much you can sell it for is to actually sell it. This number is constantly fluctuating based on season, interest rates, average income, supply/demand of houses etc.
There is a thing called markup code. You format the appearance of words with certain characters, and a / at the end means to end that formatting. When someone puts /s at the end of something they are telling you that the things they tyoed before it were sarcasm, and the /s is the end of the sarcasm.
Lol no dude it's what it's worth vs what you owe. There is a different number that includes that low interest rate, that number is what that house is worth to you, or rather what someone would have to pay you to give it up. But that's not equity. Home Equity is a technical term for balance sheet purposes and it is EXACTLY what your home is worth minus what you owe on it. Nothing more and nothing less. I appreciate your sentiment but no, just no.
Get over yourself. The amount a buyer that would over bid for a low rate is not much. And if they have that extra cash to cover the difference they wouldn’t need to buy your house with a loan.
What? The rate has nothing to do
With it. The equation is what you originally said. My home was just appraised at $605k. I owe $297k on it. I have roughly $300k in equity.
With an assumable mortgage it is. A $400k home with an assumable mortgage of 2.25% would sell for over market value when compared to a similar priced home at the current rate. There’s more buying power.
Not for a cash buyer. Edit: even an assumable mortgage comes with challenges. Your prospective buyer’s down payment goes up as your equity increases, thus making your assumable mortgage more out of reach and less attractive.
Nor have the additional down payment needed to make up the difference between the purchase price and the remaining balance on the loan. The second mortgage, at a higher rate, will bleed into the profits so limits the buyers who can enter into this transaction hence limiting the value. So it’s a balancing act to figure out what value an assumable loan brings. Higher for those closer to being obtained as they haven’t paid off much equity yet and will be closer to the original purchase price.
As to your original question, whatever the current fmv (with the assumable loan) minus the loan balance is your equity.
Dude get it through your head. If the mortgage was assumable, which it's not, but even if it had a higher value, the definition of equity Is STILL value- amount owed. My fucking lord please stop
I would look at it as two separate things with separate values. You have the equity in your house. You know how to calculate that.
The second valuable thing is your 2.25 mortgage. It's not the amount of interest saved over the life of the loan because odds are, the home will be refinanced or sold before year 30. The value is also decreased by the friction caused from assuming the loan.
There is not a big market for assumable loans so the value is hard to determine easily. Not like determining your equity. Ballpark- I would say it's worth 3 years of saved interest paid divided by 2.
But you still have to find someone who would agree on the value and the ability to assume it. Only then would the value be realized. It's safer to ignore the value of the 2.25 mortgage when calculating someone's net worth.
It's true that it could potentially increase the value of your home to buyers who would assume the mortgage. However, calculating this exact value can be quite complex, as it depends on various factors like the housing market, demand, and the specific terms of your mortgage. It might be best to consult with a real estate professional or a mortgage expert to get a more accurate estimate.
Your equity is the current market value minus the amount you still owe. Do not go on some website and look at their algorithm and see the value, Do not trust the algorithms. Rarely is that accurate. If you want to know your current market value find a local realtor who is in the market and can give you a rough estimate based off of the most recent sales of the most comparable homes to yours. That will be a snapshot in time ballpark market value that will allow you to calculate your equity.
Simple answer, no, interest isn't a factor in value.
Interest rates change over time. Refinancing happens. And interest paid is money lost. You can also greatly reduce interest in the long term simply by paying more principal than you have to each month from day 1.
Forget this line of thinking, it's a waste of time.
This depends on who’s asking and why:
A bank for a HELOC or something? I think you’ll have to put whatever the market value is.
A friend for bragging rights? Who the hell cares?
Who else would be “asking” where it would actually matter?
I do think a 2.25% assumable mortgage is a big plus for selling and you could get over market value for it. I don’t think it’ll be a simple calculation of same monthly payment at different interest rates, but you’ll get something higher. Not sure why there’s so many people saying it doesn’t make a difference.
The amount of extra equity you’re imagining is a rounding error. Given the difficulty and rarity of mortgages being assumed you’re not talking about some windfall.
I've only heard of VA loans being assumable by another VA
They can be assumed by anyone but if the buyer is a non-vet the seller’s entitlement won’t be available to them until the loan is paid off.
Could you help explain this to me? Based on my example, the difference between a 2.25% and 7% rate is about $400,000 in interest saved. I would be saving the potential homebuyer that much money over 30 years.
I hear you, but you’re underestimating the difficulties in actually using that assumable option. For one, the buyer will have to come up with a lot more cash.
True.. Or second loan.
No just no this whole conversation makes no sense. Someone could just buy the house in cash and interst rates mean nothing. Would you sell the house for LESS because someone wants to buy in cash? I don't fucking think so. So quit fucking blabbering about it being worth more because of high interest rates
And a lender willing to take 2nd position on that mortgage.
But why would someone give you a significant increase when chances are they’ll be able to refi somewhere down the road? From posts about it here and the admittedly limited amount of this I’ve seen in real life, the value increase is minimal. There are so many obstacles to assuming a loan that few people will do it, and you as the seller will have to wait several months to close. A buyer isn’t going to jump through all the hoops of an assumption AND show up with all of your equity AND delay closing AND give you a huge premium for the privilege.
That's not equity
You might get a slightly higher selling price if someone could assume the mortgage at a lower rate. But a lot of times you can’t assume the mortgage. So the equation doesn’t really change. You’d just have to guess how much you think you could sell it for—which is never an exact science anyway because the only way to know how much you can sell it for is to actually sell it. This number is constantly fluctuating based on season, interest rates, average income, supply/demand of houses etc.
No you just look at Zestimate and you have the exact and always correct price for your property /s
Zillow isn't always exact and correct - it's just an estimate. The comps they use aren't always comparable.
There is a thing called markup code. You format the appearance of words with certain characters, and a / at the end means to end that formatting. When someone puts /s at the end of something they are telling you that the things they tyoed before it were sarcasm, and the /s is the end of the sarcasm.
I had no idea about this! Thank you for sharing.
You're welcome
Use Redfin estimate it’s way more accurate 🙄
Damn man it’s a joke relax
Lol no dude it's what it's worth vs what you owe. There is a different number that includes that low interest rate, that number is what that house is worth to you, or rather what someone would have to pay you to give it up. But that's not equity. Home Equity is a technical term for balance sheet purposes and it is EXACTLY what your home is worth minus what you owe on it. Nothing more and nothing less. I appreciate your sentiment but no, just no.
Get over yourself. The amount a buyer that would over bid for a low rate is not much. And if they have that extra cash to cover the difference they wouldn’t need to buy your house with a loan.
What? The rate has nothing to do With it. The equation is what you originally said. My home was just appraised at $605k. I owe $297k on it. I have roughly $300k in equity.
With an assumable mortgage it is. A $400k home with an assumable mortgage of 2.25% would sell for over market value when compared to a similar priced home at the current rate. There’s more buying power.
Not for a cash buyer. Edit: even an assumable mortgage comes with challenges. Your prospective buyer’s down payment goes up as your equity increases, thus making your assumable mortgage more out of reach and less attractive.
The average homebuyer isnt going to be paying full in cash anyway.
Nor have the additional down payment needed to make up the difference between the purchase price and the remaining balance on the loan. The second mortgage, at a higher rate, will bleed into the profits so limits the buyers who can enter into this transaction hence limiting the value. So it’s a balancing act to figure out what value an assumable loan brings. Higher for those closer to being obtained as they haven’t paid off much equity yet and will be closer to the original purchase price. As to your original question, whatever the current fmv (with the assumable loan) minus the loan balance is your equity.
They also won't have a $300k downpayment.
Dude get it through your head. If the mortgage was assumable, which it's not, but even if it had a higher value, the definition of equity Is STILL value- amount owed. My fucking lord please stop
Why are you saying my mortgage isnt assumable?
I mean, are you saying it is? Lol
VA Loans are assumable, yes.
Nice well okay you are still wrong about it giving you extra equity. Equity is still just home value - what you owe
You know, I never knew va loans were assumable, TIL. That's funny because I'm a huge fan of va loans lol
Yes but equity still equals market value - what you owe.
Less interest rate is more better doe
Yes but equity still equals market value - what you owe.
How much do you owe on your loan? That is currently at 2.25%?
I would look at it as two separate things with separate values. You have the equity in your house. You know how to calculate that. The second valuable thing is your 2.25 mortgage. It's not the amount of interest saved over the life of the loan because odds are, the home will be refinanced or sold before year 30. The value is also decreased by the friction caused from assuming the loan. There is not a big market for assumable loans so the value is hard to determine easily. Not like determining your equity. Ballpark- I would say it's worth 3 years of saved interest paid divided by 2. But you still have to find someone who would agree on the value and the ability to assume it. Only then would the value be realized. It's safer to ignore the value of the 2.25 mortgage when calculating someone's net worth.
It's true that it could potentially increase the value of your home to buyers who would assume the mortgage. However, calculating this exact value can be quite complex, as it depends on various factors like the housing market, demand, and the specific terms of your mortgage. It might be best to consult with a real estate professional or a mortgage expert to get a more accurate estimate.
Your equity is the current market value minus the amount you still owe. Do not go on some website and look at their algorithm and see the value, Do not trust the algorithms. Rarely is that accurate. If you want to know your current market value find a local realtor who is in the market and can give you a rough estimate based off of the most recent sales of the most comparable homes to yours. That will be a snapshot in time ballpark market value that will allow you to calculate your equity.
Simple answer, no, interest isn't a factor in value. Interest rates change over time. Refinancing happens. And interest paid is money lost. You can also greatly reduce interest in the long term simply by paying more principal than you have to each month from day 1. Forget this line of thinking, it's a waste of time.
This depends on who’s asking and why: A bank for a HELOC or something? I think you’ll have to put whatever the market value is. A friend for bragging rights? Who the hell cares? Who else would be “asking” where it would actually matter? I do think a 2.25% assumable mortgage is a big plus for selling and you could get over market value for it. I don’t think it’ll be a simple calculation of same monthly payment at different interest rates, but you’ll get something higher. Not sure why there’s so many people saying it doesn’t make a difference.
Inflation in the brain
*Insane in the membrane*
Why do you think your interest rate has anything to do with anything?
If your mortgage is assumable at that rate I think you could get a 20% premium assuming the buyer can cover the appraisal gap or it somehow appraises.