OT: Need guidance on Loan Assumption please

Ask the Hackrs
1

  • Found a sweetheart deal on a 993 911 (1996)

  • Seller wants X in cash and has the remainder of the loan through Wells Fargo Dealer services

  • Turns out WF will not transfer loans through private parties

  • I’m finding it a bit difficult to find an institution that will create a new loan for the car due to it’s age

  • Seller brings up making an agreement wherein we would come up with a contract through an attorney and that I would pay for the remainder of the loan. Once it’s paid, it would then be transferred to my name.

What am I getting myself into here if this is agreed upon?

2

I’d trust an attorney over some random people on the internet that you have no clue what their background is. Maybe start with them.

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3

My $.02 on a used Porsche - if you can’t easily pay cash for it - you shouldn’t be buying it

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4

What’s the rate on the Wells Fargo loan?

Do you have a business?

5

I can but I’d prefer to have my money wrapped up in an investment

6

  • Don’t know I haven’t brought this up with the seller but they won’t let me assume the loan anyway

  • Yes I do

7

If you want to steer clear of the attorney and many possible issues.

You could take a smb loan from a reputable online lender through the business. The APR rate could be from 7% to 25% (usary cap in NYS). Use the proceeds to payoff the existing Wells Fargo loan.

Many online lender DO NOT have a hard inquiry on the credit pull.

I’m guessing the existing loan has a substantial APR and term—- if the loan is almost paid off do not refi it as the principal portion of the payment grows as the loan ages.

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  • Thank you, I didn’t even think about going this route

  • There’s no way that I can insure the car anyway if it’s under his name so there goes that option

9

Pay cash and then refinance through a credit union?

10

Assuming a loan means taking over the seller’s mortgage and continuing to make the payments on it. Most loans can’t be assumed, because the banks don’t allow it. Assumption is available only on FHA and VA loans, which are the minority.

Is it a good deal? It depends. First, let’s look at what’s the same with assumption vs. getting your own loan. In both cases, you still have to have good credit to qualify for the loan. The days of “non-qualifying assumption” are long gone. (The last of these closed in 1989.) Also, in both cases you have to pay some cash to the seller. With a regular loan that cash is a down payment; with an assumption, it’s to pay the seller for the equity they have in the house. If the purchase price is $200,000 and there’s $160,000 left on the mortgage, you’d either have to pay the seller $40,000 in cash or get a separate loan for the $40k.

Now let’s look at the differences. The first is the interest rate. With a new loan, you pay the current market rate for interest. But when you assume, you inherit the rate that the original buyer got when they got the loan. Interest rates are still so low that you’re really unlikely to get a much better rate with an assumed loan than with a new one. But, if interest rates go up a lot, then assuming a loan with a low interest rate becomes attractive.

Another difference is the term. A new loan usually runs for 30 years, sometimes 15. But with an assumed loan, the clock started ticking when the original buyer got the loan. So it’ll be paid off a little faster. If the buyer was 2.5 years into a 30-year loan when you assumed it, then you’ll have 27.5 years left.

The final difference is that are lower when you assume. That’s because you don’t have to pay the bank’s “origination fee” on the loan.