Finance
What is 'assumable mortgage' and why might it be valuable in Hawaii in a rising rate environment?
AA. A mortgage that the lender automatically pays off when the property sells
BB. A mortgage that can be transferred to a new buyer with the existing terms (rate, balance, remaining term); valuable when existing rates are below current market rates✓ Correct
CC. A loan that doesn't require qualification because it's automatically assumed
DD. A mortgage assumed by the government when a buyer defaults
Explanation
An assumable mortgage can be transferred to a new buyer who 'assumes' the existing loan terms, including the interest rate. FHA and VA loans are generally assumable with lender approval. In a rising rate environment, a seller with a low-rate assumable loan has a significant marketing advantage—buyers save on interest costs throughout the loan term, which can be especially valuable on Hawaii's large loan amounts.
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