Invest in Our Car Wash Fund for a Solid 12% Annual Cash Flow! - Click To Learn More

September 29, 2022

Why Loan Assumptions Make Sense as Rates Continue to Soar

In a rising interest rate environment, properties with marginally lower interest rates and longer amortization terms...

Why Loan Assumptions Make Sense as Rates Continue to Soar

When a loan is assumable, it means that it can be taken by another borrower, who ‘assumes’ the payments, as well as the ownership of the property. An assumable mortgage lets buyers assume the entire mortgage as it is — the interest rate, the current principal balance, the repayment period, and all the other mortgage terms. Fortunately for borrowers, HUD 232 and HUD 232/223(f) loans are fully assumable, with permission from the FHA/HUD, and a 0.05% fee.

In a rising interest rate environment, properties with marginally lower interest rates and longer amortization terms will potentially be more marketable. If a buyer purchases a similar property without assumed debt they will be paying market interest rates, so, if they purchase your property, they could save a lot of money. However, if interest rates are falling, there isn’t much of an incentive for them to assume your debt.

A final benefit of HUD financing is the fact that it can allow borrowers to avoid paying a prepayment penalty if they decide to sell their property just a few years after purchasing it. As long as the buyer assumes their loan, the seller will not be responsible for any prepayment penalties. However, the new borrower will have to accept that they will face prepayment penalties if they decide to sell the property before the prepayment period is up. Of course, if the new borrower also decides to sell quickly, they can always have a new buyer assume their loan.

QC Capital’s latest deal under contract, The Verdir at Hermann Park, currently has a HUD loan with a 2.5% interest and a remainder of 28 years on the amortization that will be assumed. If rates continue to climb towards 6% and remain high as the FED to battle inflation, the loan itself becomes a selling point when it is time to sell.

If you are interested in learning more about this class-A, 224 unit asset located next to the medical complex in Houston Texas, you can visit our website’s page for The Verdir.

QC Newsletter

More Related Posts

Stay up to date with the latest and greatest in real estate and investing.
March 22, 2024

Profit Potential: The Lucrative World of Car Wash Investments - Insights from The Pulse Report Q1 2024

Explore car wash investments with insights from The Pulse Report Q1 2024, revealing growth opportunities and consumer-driven profitability
March 15, 2024

Maximizing Passive Investment Returns: The Blueprint for Ideal Car Wash Locations

Explore the lucrative potential of passive investment in car wash businesses by understanding the key elements of an ideal location.
March 8, 2024

Empowering Financial Growth: Top 5 Reasons Doctors Choose Passive Real Estate Investment

Discover why doctors are choosing passive real estate investing as their preferred path to financial security.