April 5th, 2015 7:47 AM by Joan Rusco
If you have it, love it, if you don’t have it, get it! We have, on these pages, been extolling the many virtues of a loan gauranteed by the Veteran’s Administration. There’s one virtue that may be a stand-out feature in the future. It’s a feature that may put a very, very positive light on your property in the next 5, 10 or even 15 years. Before we get to that feature let’s back up and fill in some detail on homeownership.
A study sponsored by the American Association of Home Builders finds that, on average, today’s homeowner is likely to stay in his/her home for 13 years. According to the study first time home buyers are likely to stay 11 years while the move-up homeowner will stay a few years longer. Therefore the average is about 13 years. Now what, you may ask, has this to do with my V.A. loan from VALoansMN? Quite a lot.
When you acquire your loan through us it is a typical 30-year loan. Each month you pay the interest on the remaining balance and you pay a portion of the loan down. At the end of 30 years you pay off the loan completely. This is known as amortization. If you want to see how much of your loan you pay off each month just ask us. In the first few years most of your monthly payment goes to interest (which, by the way, is deductable from your income for tax purposes). A fraction of that payment goes to paying down the loan. Here’s an example:
You take out a VA Loan of $200,000. Let’s say your interest rate is 4% (not neccesarily today’s rate). Your monthly payment on that loan would be about $955. Of that first payment about $667 is for interest, the remaining $288 pays down the principal.
Here’s the feature we were referring to in our first paragraph above. Your VA Loan from VALoanMN is assumable. This means that if you decide to sell your home another qualified veteran can assume the unpaid balance of your VA Loan at today’s rate. Can you imagine where mortgage rates might be in 10 to 15 years? Do you remember mortgage rates of 15% (or higher) in the 1970’s and 80’s? We do. So let’s say in about 10 years you decide you want to sell your home. Let’s say the real estate market is as bad then as it was here in Minnesota or the Dakotas a few years back, that current mortgage rates are in the double digits. We at VALoansMN got you a mortgage loan at 4%. Think about how attractive your home might be to a qualified veteran who can assume your 4% mortgage as part of a deal to buy your home! In the first 10 years you would pay down about $42,400 of that $200,000 loan. Your veteran buyer would be able (assuming he/she is qualified for a mortgage) to assume your mortgage (your loan would be paid off completely) of over $157,000 at 4%! Think that may be attractive in a world of 10% (or higher) mortgages? Whose house do you think will sell in that tough real estate market? A house that comes with a 4% mortgage or your neighbors house that would bring a mortgage loan of 10%?
Assumability! That is another great feature of a loan from VALoansMN. Want more info? Give us a call and we’ll talk about why you should think long and hard about getting a loan from VALoansMN.