Home loan question.

kskillz · #1 12-18-2006, 04:55 PM

Hi,

I own a home that is currently on the market, I'm getting married and am looking to move across town.

My brother just a got a job near where I currently live, and will be needing housing in the area. He and his family like my home and would love to buy it. Once my listing contract expires (a month from now), I'd like to get my brother and his family into my house. We want to do this as cheaply as possible, I'm willing to sell at a price just to cover the loan and costs to my brother. Any advice on how to keep the fees as low as possible in this situation? Is it possible to do something like have my brother assume my home loan?

Thanks!

scotchnrocks · #2 12-18-2006, 07:46 PM

I would try talking to a real estate attorney. If your brother could assume your loan that would be better because he would get a break on the upfront interest in a fixed mortgage.

SossMan · #3 12-19-2006, 11:16 AM

You can call your lender and find out if your loan is assumable. It probably isn't, but it's worth a shot.

Secondly, I would contact a good realtor and let them know that you simply want them to do the paperwork for a sale in which you already have a buyer. Most will do this for a somewhat nominal fee, maybe a grand. An escrow company would help facilitate the transfer.

SossMan · #4 12-19-2006, 11:18 AM

[ QUOTE ]
I would try talking to a real estate attorney. If your brother could assume your loan that would be better because he would get a break on the upfront interest in a fixed mortgage.

[/ QUOTE ]

it's not really a break. I don't know where this misnomer comes from, but the whole "the bank collects interest upfront" thing is pretty misunderstood. I can show you the math if you like.

Pocono Drew · #5 12-19-2006, 11:44 AM

If you are going to do this without a real estate agent, then seek out a good lawyer, who can facilitate all of the necessary paperwork.

scotchnrocks · #6 12-19-2006, 01:59 PM

[ QUOTE ]

It's not really a break. I don't know where this misnomer comes from, but the whole "the bank collects interest upfront" thing is pretty misunderstood. I can show you the math if you like.

[/ QUOTE ]

I think you've got something mixed up, please show me your math.

If you take a 30 year fixed w/ $300k principle. For the 1st 15yrs the cumulative interest paid is $236,904 and for the last 15yrs $110,611 in interest is paid. The bulk of the interest is indeed paid "upfront."

pig4bill · #7 12-20-2006, 12:09 AM

Interest is paid on what's owed, simple as that. You owe more in year 1 than in year 15.

SossMan · #8 12-20-2006, 04:29 PM

[ QUOTE ]
[ QUOTE ]

It's not really a break. I don't know where this misnomer comes from, but the whole "the bank collects interest upfront" thing is pretty misunderstood. I can show you the math if you like.

[/ QUOTE ]

I think you've got something mixed up, please show me your math.

If you take a 30 year fixed w/ $300k principle. For the 1st 15yrs the cumulative interest paid is $236,904 and for the last 15yrs $110,611 in interest is paid. The bulk of the interest is indeed paid "upfront."

[/ QUOTE ]

300k loan. 2 scenarios.

Scenario 1:

new 30 year loan at 6%
payment = $1798.65
month 1
interest = $1500
principal = $298.65

scenario 2:
300k loan 6% interest rate
originally a 30 year loan taken out 15 years ago and we are going to assume it.

Here's the key, if there is $300k left on the principal, but we are 15 years into the loan, the original balance was ~$420k. Therefore, the payment on this loan is $2518.

This happens to be almost exactly what the payment would be on a 15 year loan at 300k (allow for rounding errors).

Essentially when people espouse this "interest paid upfront" theory, they are arguing for the benefits of a 15 year loan vs. a 30 year loan. There is nothing magical about being 15 years into a 30 year loan.

scotchnrocks · #9 12-20-2006, 08:48 PM

[ QUOTE ]

300k loan. 2 scenarios.

Scenario 1:

new 30 year loan at 6%
payment = $1798.65
month 1
interest = $1500
principal = $298.65

scenario 2:
300k loan 6% interest rate
originally a 30 year loan taken out 15 years ago and we are going to assume it.

Here's the key, if there is $300k left on the principal, but we are 15 years into the loan, the original balance was ~$420k. Therefore, the payment on this loan is $2518.

[/ QUOTE ]

If you pay a 30 year fixed loan off on time over 30 years, you will pay more money in interest in the first 15 years than you do in the last 15 years. That is fact. I think you're talking about something else.

krishan · #10 12-20-2006, 11:40 PM

[ QUOTE ]
[ QUOTE ]

300k loan. 2 scenarios.

Scenario 1:

new 30 year loan at 6%
payment = $1798.65
month 1
interest = $1500
principal = $298.65

scenario 2:
300k loan 6% interest rate
originally a 30 year loan taken out 15 years ago and we are going to assume it.

Here's the key, if there is $300k left on the principal, but we are 15 years into the loan, the original balance was ~$420k. Therefore, the payment on this loan is $2518.

[/ QUOTE ]

If you pay a 30 year fixed loan off on time over 30 years, you will pay more money in interest in the first 15 years than you do in the last 15 years. That is fact. I think you're talking about something else.

[/ QUOTE ]

Do you understand why though?

Krishan