Keep current low interest rate with a new mortgage

[Lj Cal]

Hello,

I want to buy my family home. It would be a direct sale with no brokers involved. The current mortgage interest rate is half of what I was quoted. Is there a way I can take on the current mortgage payments (at the low rate) and get a new mortgage to make up the difference between the existing mortgage and the current value?

For example:

existing mortgage: $50k

current rate: 3%

home value: $200k

new mortgage rate: 6%

Can I take over the $50k at 3%, then get a new mortgage for the remaining $150k at 6%?

[Kevin Sobilo]

@Lj Cal, not likely.

1. If you can find a lender willing to give you a 2nd mortgage it would be at a HIGHER rate because its in 2nd lien position and therefore more risky. So, in your example it might be at 9% interest rate which would make the weighted average HIGHER than taking out a mortgage at today's interest rates because the 2nd mortgage would be 3x as much as the 1st mortgage. 

2. Taking over a mortgage can mean different things. If you intend to occupy this as a primary residence you could "assume" the loan meaning you would personally need to qualify with the existing lender to take on the loan in your own personal name.

3. If you aren't going to assume the loan as discussed in #2, then you could do a "Subject To" deal where you just take over payments BUT that is really only good for the seller if they are facing foreclosure. Otherwise it is riskier for a seller. I assume this being a family sale that that is not the case.

4. "Buy the property, but date the rate!". This is an old real estate adage. You may feel like a 6-7% rate is "high" but it is historically a pretty average rate. The property will last forever, but if rates go down, you can always refinance later. So, if its a good deal at current rates over time it will only get better as you get opportunities to make moves like that.