Mortgage Research Network Podcast

Welcome to the Mortgage Research Network Podcast. We bring you the latest mortgage and real estate news 3 times a week. The audio is AI generated, but content is fact-checked by me, Tim Lucas, editor of MortgageResearch.com and a former mortgage professional. And with me is Craig Berry, a mortgage originator with 25 years experience. Craig, What if I told you that your next home purchase could come with someone else's incredibly low mortgage rate from 2021? The government's floating some ideas to tackle the housing crisis, and this one's got everyone talking.

That's quite an interesting proposal from FHFA Director Pultee. Though I'm wondering how practical it really is when you look at the numbers.

Well, let's break this down. Right now, mortgage rates are sitting at around 6.3%. But if you could take over someone's mortgage from early 2021, you'd be looking at around 2.65% according to Freddie Mac numbers. We're talking about saving hundreds of dollars every month.

Hmm... on a $300,000 house, that's over $600 in monthly payment differences. Pretty significant savings.

Exactly — but here's where it gets tricky. Let's say you find that $300,000 house with an assumable mortgage, but the seller has already paid it down to $130,000. Now you're stuck trying to figure out how to cover that $170,000 gap.

And that's where the dream starts to fall apart for most buyers, right? They'd need a second mortgage at today's higher rates. So that might take a big bite out of savings.

Exactly. And a lot of buyers don't know that assumable mortgages aren't new. FHA, VA, and USDA loans have been assumable for years, but hardly anyone uses them. These buyers typically don't have the cash to cover the gap.

What are some other reasons assuming a loan doesn't often work?

Well, it's a perfect storm of complications. First, you've got to find someone with a low-rate mortgage who's willing to sell — which, let's be honest, is rare these days. Then you need to qualify for the assumption, get the lender's approval, and probably arrange that second mortgage at current rates.

The legal aspects make it even more complicated. I understand sellers could still be on the hook for the mortgage unless they get specifically released from it.

That's right. And then there's this other idea they're proposing — portable mortgages, like they have in the UK. Imagine being able to take your low-rate mortgage with you when you move. But American lenders are going to fight that one hard.

Because it would cut into their profits from new mortgages, I'm guessing?

Exactly. And here's another wrinkle — even if they implement these changes now, they can't retroactively make existing mortgages assumable. Those 2020-2022 super-low-rate mortgages? They're locked in as non-assumable.

Well that's a pretty big limitation. So these changes would only help future borrowers?

Right, and by then, who knows what rates will look like? The NAR's chief economist, Lawrence Yun, made an interesting point about another proposed solution — the 50-year mortgage. He said the monthly savings would be tiny compared to the downsides.

Like taking 40 years just to pay off half the house? That's a long time to build equity.

You know what this all reminds me of? It's like we're trying to solve a water shortage by inventing better cups instead of finding new water sources. The real problem is we just need more affordable homes.

That's actually a perfect analogy. We keep coming up with these complex financial solutions instead of addressing the supply issue.

That's EXACTLY it. And until we address the fundamental supply problem, we'll probably keep seeing these creative financial solutions that sound great on paper but don't quite deliver in practice.

That's about all the time we have for this topic, but we go into even more detail on the site. For more, search assumable mortgage at Mortgage research.com. We'll see you next time on the Mortgage Research Network Podcast.