Why would a person assume a underwater mortgage
Yes, unless a seller has the cash to cover the difference between what their house will sell for and what they owe, they may feel pretty much stuck. Buyers though in a declining market, find many benefits to bailing them out. In fact it may be the smartest financial move they have ever done. There are several factors to consider. Number 1. Buyers will have little – no out of pocket money to purchase the home. The buyer assuming saves money on regular mortgage costs like Mortgage, Housing, city, and appraisal fees. 2. For some this is the easiest way to get into a home, if they have had difficulty in the past because of low credit scores and income. 3 Another benefit of a assumable mortgages is the interest rate. If a person has poor credit, they will have to pay a higher interest rate, and especially when market conditions are poor. Buyers will be holding a ‘profitable share’ when interest rates sky rocket in few years. They could either raise their home price and still have a lucrative asset people would want to buy, or keep the home to get a higher down-payment as part of the value the buyers enjoys. In any case refinancing to a FHA assumable loan is worth the time and effort.. 4 The market is going to recover! Inexplicitly please understand this. Even the Federal Reserve chief Ben Bernanke says the US economy will recover at a “moderate” pace. Home values will increase again. When it recovers so will the equity.
Now that future rates are expected to be higher than current rates, there is real incentive and value for all slightly underwater mortgages.