Hi there, I am looking at a property that says it is an assumable loan for $1.7 million (if I were to get approved of course) but then the listing price of the property is $4 million. If I were to assume the loan, does this mean I am paying $1.7 million plus the $4 million or does it mean I only have to pay $1.7 million for the property?
Thank you for all your help in advance, I am just a bit confused on this.
It means the list price of the property is $4 million, but (presuming you qualify) you could assume their loan of $1.7mm. The idea being the balance of $2.3mm would be for you to get financed / pay for yourself. It is likely their interest rate is lower on the $1.7mm than today's rates, so that is why they are offering it to the buyer to assume. As a quick down and dirty calculation, you can expect that each $1mm will cost about $7,000 or so per month... so about $28,000 per month for the payment. It will depend on rates... but it is just a quick ballpark for you.
In this instance, it would you mean you would assume the loan of 1.7mm, but would have to make up the difference of 2.3mm to come up to the total purchase price of 4mm.
To make it clearer, the listing price is always going to be the total price, regardless of if there is an assumable loan or not. An assumable loan only means you can assume the current debt that the seller has to take over the loan, but you still have to make up the difference by either cash or some other form of second position mortgage/loan you are able to procure. That is typically a more challenging aspect of dealing with purchases with assumable loans.
You can ask the seller if they are willing to seller finance a portion of the 2.3mm difference to lower your out of pocket expense.