Should I assume my mother's mortgage or buy her house?
I am 29 years old and live in a home where I don't have to pay rent or utilities. I make roughly $60,000 a year and the only debt I have is $12,000 in student loans. My credit score is 780. I am wondering if I should assume a mortgage from a property my mother owns. She has been paying on the property for 15 years with a 30-year loan at 6.25% interest. The other option is to buy the house and lock in a lower interest, or to assume the mortgage and then refinance.
Whatever you do, it would be a good idea to take a look at refinancing because 30 mortgage rates today are a little over 4% and 15-year mortgage rates are even lower than that. Probably the easiest way would be if she sold you the home and you took out a new mortgage. If you talk to a mortgage person then they could help you take a look at what the payment would be if you were to buy the house from your mother. Some areas even have great first time home buyers incentives that you might be able to take advantage of if you are a first-time homebuyer, although many of the incentives have been going away as the housing market continues to strengthen.
Before deciding what to do, think a little on your and your mother’s immediate plans. With your current living situation, can you expect to continue without the burden of rent or utilities for an extended period? With your annual earnings and the amount of student debt you have (which I assume has a relatively low interest rate), buying the house seems like a good option, but that’s on the condition that you won’t be forced to start paying rent anytime soon.
As for your mother, is she retired, planning to retire soon, or thinking about moving as she enters her later years? Does she still live in this house or is it just an asset she owns? Whether or not you assume her mortgage should hinge on these factors, as it won’t be fun to deal with an unexpected change in plans.
I’m sure you can get a better interest rate if you refinance, and with your mother this far along in her 30-year mortgage, you should be able to get a 15-year policy with solid terms. As long as you don’t foresee any drastic changes in your living situation, this seems like a good opportunity to invest in a property you’ll be able to own outright in a relatively short amount of time. That will help your mom and provide you with a good investment down the road.
Whatever you choose, shoot for a lower interest rate. If you have the flexibility to pick, I think buying the house from her and getting a new mortgage is your best option.