Everyone knows that when you buy a home, even though you may have the debt of a Toronto mortgage, in several years that mortgage is going to turn into one huge asset. This is after all, one of the biggest draws of home ownership – and one that many have been able to realize thanks to today’s low interest rates. But along with that home ownership, those low rates bring with them yet another opportunity – and that’s an assumable mortgage.
An assumable mortgage is one in which the buyer of a home assumes the current mortgage that is on it. These types of mortgages are almost unheard of today, because buyers can get such a cheap rate for themselves and lock it in for as long as 10 years. But, says Glenn McQueenie, a Toronto real estate agent, “I remember the days clearly. In the early 1990s a lot of people had 15%, 14%, 13% mortgages. If there were two properties side by side and one had assumable financing at 9% compared to one at 13%, there would be a bigger draw to the 9%. We didn’t have a lot of multiple offers back then, so this would get you more showings.” More showings, and possibly even a bigger purchase price. And that’s where the real profit for the homeowner lies – if they know how to use it properly.
One key factor in transferring your mortgage to someone else is to speak to your Toronto mortgage broker and make sure that the lender will approve them. Not all lenders will approve the transfer of a mortgage, depending on the area, they’re own requirements, and the specific scenario.
Another thing that sellers need to consider is that if they’re going to transfer they’re mortgage, they’re also going to need a new one if they plan on buying another home. In many cases, a Toronto mortgage is portable, meaning that it can be transferred from one property to another – not just assumed by one person from another. And why would you want to give away that great rate you locked in, if you can keep it for yourself? Making sure your mortgage isn’t portable is of huge importance when talking about having someone else assume your mortgage, and that’s something your mortgage broker can also help you figure out.
Having an assumable mortgage has become a huge opportunity for homeowners that have a low, fixed-rate mortgage and are thinking of selling their home in the near future. And while it can give you the edge in the housing market and bring you a higher profit on your home, you need to enter with caution, and make sure that what you’re doing is really going to pay off.
