PHOENIX — With high mortgage rates pricing many families out of the housing market, real estate experts say there's a little-known "cheat code" to secure a much lower rate.
It's called an assumable mortgage — a method first made popular during the 1980s when rates were historically high.
Terry Day is a Valley Realtor with DeLex Realty who says he was looking for a home for a client when he found one in Goodyear that was a perfect match for his family instead.
He bought the home in October after assuming the seller's mortgage. That means the seller's loan, along with their low interest rate of 2.375%, was transferred over to him. That makes Day's monthly mortgage payment under $2,000. He says if he took out a new loan, he'd be paying 7% interest and over $3,000 a month.
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Day calls it a "mortgage cheat code."
"Because if you're going to buy a house today, you're paying so much more money," he said. "The goal is to save money and build equity for yourself and this allows you to get ahead of the curve."
A conventional loan can't be assumed, but government-backed FHA loans and VA loans can. Day says a benefit for the seller is they'll have more buyers interested in their home.
But he says when looking at what they're selling the house for compared to what's left on the mortgage, the buyer will have to find a way to make up the difference. In this case, there are three options: the seller can carry the note on the second part, the buyer can get a second mortgage, or pay the difference with cash.
"Most of these... 10% of the home price is what you need to have for cash in your pocket," Day said. "But that's not true with everything."
Day says he's now saving $1,000 a month this way and believes others can too.
If you are searching the market for a house or thinking about selling and have questions about assumable mortgages, he recommends talking with your Realtor to learn more about the process.
Mortgage rates have doubled within the past year, as the Federal Reserve raised interest rates in an effort to curb inflation. At the start of 2022, rates were 3.4% and sky-rocketed to 6.9% by the end of 2023, according to the company Bankrate.
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