Vintage Financing from the 1980s: Today’s Housing Affordability Solution

 

The current state of the housing market bears intriguing similarities to the landscape of the 1980s. One of the striking parallels is the persistence of rising prices. In the 1980s, a combination of factors, including high inflation and speculative investment, led to soaring home prices, making it increasingly difficult for entry-level buyers to enter the market. This became even more complicated by rapidly rising interest rates. A similar trend is observed today. Housing prices have soared to all-time highs – which is again coupled with interest rates rocketing upwards.

 

This perfect storm of housing prices and high mortgage rates equals overwhelming housing payments for many prospective buyers. Renters are continuing to rent and families that were once looking to move up in home are hunkering down and weathering the storm…just like in the 80s.

 

So what can buyers do to return to affordability? Most would answer that there isn’t anything you can do but wait for rates to drop, housing prices to fall or both. We only need to look back to the days of neon leggings, mix tapes, and Aquanet for the answer – Mortgage Assumptions.

 

A mortgage assumption, simply put, is taking over another person’s mortgage with all its terms. This would include the remaining length of the loan, the INTEREST RATE AND PAYMENT, as well as the current balance. With the help of the right professionals, you can identify homes for sale that have assumable loans. Many on the market right now carry rates ranging between 2.25% and 5%. To put that in perspective, if you purchase a home with a $500,000 assumable loan with a 3% interest rate, your principal and interest payment would be $2108. Buying the same home with a current market rate of 7.75% would yield a payment of $3582. That’s a savings of over $1400 per month!

 

It’s easy to see why homebuyers and sellers are hopping in their modified Deloreans and hitting that 88mph.