Why an Assumable Fixed Rate

A low-interest-rate assumable plays into your short-term strategy. This loan will help your property sell quicker and at a higher price. If you've selected the property wisely, you could probably sell without listing the house with a brokerage firm. Because only FHA and VA now offer new assumable fixed-rates, you may pay more closing costs than you would for a conventional (Fannie/Freddie) fixed-rate, but in this short-term situation the FHA/VA loan could prove profitable.

As another possibility, look for a low-rate FHA/VA loan that you can assume. At a time when market rates were at 10 percent, I sold a property with an assumable 8 percent fixed-rate in two days simply by word of mouth. I never hired a sales agent or even ran a newspaper ad. On another occasion when market rates were at 16 percent, I bought a property with an assumable 13.75 percent from a for-sale-by-owner (FSBO) during the first week he had placed the property on the market. Also, the "subject to" property that I bought (see Chapter 3) with a 10 percent (way below the current market rate) interest rate was a word-of-mouth transaction.

When you plan to move within three to seven years, ARMs make good sense. But experience shows low-rate assumable (or subject to) fixed-rates can work as a short-term ownership strategy—either as a new origination or as a loan you take over from your sellers.

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