Purchasing a property with a loan assumption - Posted by Ara

import · July 23, 2007, 9:25pm

Posted by James Harris on July 24, 2007 at 16:16:10:

Ara,your post doesn’t seem to make a lot of sense. You’re buying property that you can assume the loan of $1,000,000 or 1 million dollars, the fee for the assumption is 1% or $10,000. So, what is the acual sales price? If you seek advice on this deal you will have to give us more informatuion on the deal, let us know what you are talking about.

import · July 23, 2007, 9:25pm

Posted by Ara on July 23, 2007 at 21:25:23:

We have a property under contract that has an insured mortgage for 1,000,000 at 7.25% interest rate for 30 years. It must be assumed by the buyer and the buyer must pay a 1% fee to assume. The loan can not be prepaid before 2010. If we assume the mortgage we’ll have to come up with nearly a $1.0 Mil. which is about 40% equity in the property. I would only like to put in 20% equity. Here is what I would like to do and Iâ??m not sure if itâ??s possible without costing too much:

Get a new mortgage for 20% equity instead of 40% equity
Not get hit too hard on the pre-payment penalties

Note: the seller wants to cash out, no financing on his side.

import · July 24, 2007, 10:03pm

Re: Purchasing a property with a loan assumption - Posted by StevenS(CPA)

Posted by StevenS(CPA) on July 24, 2007 at 22:03:10:

First this doesn’t seem like a great deal but it may be if we had more information.
What is the prepayment penalty? Can it be neg. down, if you get a new loan through them or some other inducement?

Basically, it sounds like you’re going to have to pay one way or the other. Unless the seller is willing to do a wrap and a balloon after the prepayment penalty date is past. But we would still need more information about the deal.

Hope this helps
and good luck