Boomer Homebuyer Got 2.5% and 3.5% Mortgage Rates, Was Tough but Worth It

I have lived in Oregon for most of my life. In 2020, my husband and I purchased a home in Beaverton for $650,000 with a 2.5% mortgage interest rate.

I am a USAF veteran and the previous owners of the house let us know that the house had a Veterans Affairs (VA) assumable mortgage. My husband and I were interested in it, believing it could be a valuable asset.

This is because assumable mortgages are very large. For the buyer, this can make or break the amount of house they can afford. And for a seller, it allows them to offer the home at a slightly higher price because potential buyers are likely to get a lower interest rate.

My husband and I knew interest rates weren’t going to stay low forever. So, if we decided to sell the house in the future, the lower rate, which could be passed on to the next buyer, would benefit us as sellers – it would make the whole transaction very attractive.

We bought another house with an assumable mortgage when rates were higher

We purchased another house with an assumable mortgage in 2023.

My daughter, who was not supposed to have a baby, ended up getting pregnant. My husband and I were very excited. It was her first child and my first grandchild, and I knew she was going to need help with the baby.

Our house in Beaverton was an hour and a half away. We thought moving to Gresham, which is 15 minutes away, would make a huge difference.

In Gresham, there weren’t many homes for sale. That’s because inventory is in short supply throughout the Portland metro area. I don’t think this has made the housing market as competitive as it was two years ago, but housing prices remain quite high.

Although there were a few neighborhoods that we were particularly interested in, none of the accommodations met our needs. Most properties needed some sort of renovation or major update.

We searched for four to six months and started to get discouraged. But in December, I came across a house that we really liked in the neighborhood.

The house was built in the 1990s and measures 2,800 square feet, with four bedrooms and 2½ bathrooms. It was on the market for $620,000, which was the highest price, but it offered what we were looking for in a home, like a main floor master bedroom.

When I read the description of the house, it mentioned an assumable mortgage, which made the house even more appealing to us. We bought it for $615,000 and ended up paying the difference between the sale price and what they still owed on the house, which was $260,000.

We also paid them a $10,000 bonus so we could keep their VA entitlement since mine was already used for the house in Beaverton.

Basically, as a veteran, if you authorize someone to assume your loan, your VA entitlement goes with that loan. This means you can no longer purchase another home with VA entitlement.

Our decision to buy the house ultimately came down to two reasons: First, the interest rate was 3.5%, down from the going rate of at least 7.5% in December. Second, when we took over the mortgage, it only had a term of 23 years remaining, making it a shorter term than the full mortgage term of 30 years.

For our Gresham home, principal and interest are based on $359,000; at 7.5%, the payment is $2,510. With the assumption of the 3.5% loan, the payment is $1,612. Compared to the latter, the saving is $898 per month.

Or look at it this way: over the life of our loan, since we assumed it, it’s only 23 years or 276 payments. The monthly savings of $898 multiplied by the remaining payments represents a lifetime savings of approximately $247,848.

Getting an Assumable Mortgage Isn’t Easy

Assumable mortgages can be very difficult to find.

As a buyer taking over an assumable loan, the biggest issue is making sure the sellers understand that they need to start the process with the bank.

It looks like this: The homeowner goes to their bank and tells them that they are selling their house and want to use the assumption option on their existing loan. At this point, the bank sends the documents to new buyers so they can pre-qualify for this loan.

Banks don’t make many assumable loans because they have no incentive to accept traditional loans. They would rather give you an interest rate of 7% rather than 2%.

My biggest advice is to be patient, because banks take a long time to start the administrative procedures. And the second tip is to be responsive.

When granting our assumable loans, we were quite aggressive with the bank. Every time they requested information, we followed up with them the same day. You need to stay involved, engaged and active in the process.

We’re selling a house with an assumable loan – and it’s tricky

After living in the house for three years, we put it up for sale in 2023. It is currently on the market for $889,000 with a 2.5% mortgage rate. There is approximately $611,000 remaining on the assumable mortgage.

The principal and interest on $611,000 at 2.5% is $2,414 per month. This same P&I at the current interest rate of 7.5% would amount to $4,272. This represents an interest savings of $1,858 per month over the life of the loan.

So far, the house has received a lot of interest from buyers. When it was first put on the market, 50 people came to view the house. We have received a few offers and currently have a buyer in the intake process.

Owning two homes has been very stressful on our budget since I am retired on a fixed income. Any savings we have will be returned to our retirement fund once Beaverton House closes.

The process of getting an assumable mortgage isn’t easy, and I wouldn’t recommend it if you’re not willing to put in a little extra effort.

I think the process is worth it on the buyer’s side, but I wonder about the value on the seller’s side.

Our house has been on the market since December. We are working with our third group of buyers. The process just takes a long time. Let’s hope this time will be good.