Who can ell me about Assumable Loan

Question

Property price $11,000,000, assumable loan (fannie Mae at 3.5%) $8,000,000. Cap rate 9.2%, Occupancy rate 68%. NOI $1,200,000, Location A+.

Now let say I can negotiate half of the 3M and seller finance the rest at 10 years.

How assumable loan are done? Is it difficult to get it? I can bring occupancy to 90% and reduce expenses 30% less what they currently pay.

Luis

Scott Po · Answer

Also, you’re recycling this loan, putting your name on it instead of the sellers. The lender does not create a whole new loan or anything. Doing that would void the current mortgage leaving you with a current market interest rate. It’s literally slapping your name on the mortgage over the seller’s. If any other loan terms change, you’re getting a new mortgage. You don’t want that, you want the old mortgage and its terms (theoretically)

Scott Po · Answer

Yes. Think of it as the govt forcing the lender to take whiteout and use it on all the property documents, whiting out the sellers name and writing in yours instead. Just mind the gap. The assumption gap that is.

Luis Herna · Answer

Ok I see, But assumable loans means the same interest rate will stay the same?

Scott Po · Answer

I just did an assumable loan. Still not quite sure what your deal info is but from what I can tell you, you will have to come up with the assumption gap (cash/finance). You will get their interest/equity. It took me about 4 months for the paperwork to go through. Mine was just a single family home also.

Nathan Gesner · Answer

You will have to meet the lender's qualifications, just like the original borrower did. The bank won't transfer the mortgage unless they know you are fully qualified to handle it. I doubt they would allow you to finance half of the downpayment.