Are my calculations reasonable?
Hi,
Hope you’re doing great.
I own my home in South Bay (SF Bay Area). It’s a beginner home. Bought it as a fixer upper 7 years ago, put in a lot of time & effort in remodeling it over the years and have all the bells & whistles on it now (Best roof on market with warranty, battery backup, radiant heated flooring, mini split ACs, remodeled kitchen + bathroom, new appliances, brand new concrete all around the house including steps, etc)
Some work is still on the books (landscaping, garage door, exterior paint, 1 bathroom to be remodeled but functionally I use it everyday)
The best deal I have is the 2.5% rate on a 30yr fixed, 25 years to go. Confirmed it with my lender that it is Assumable/Transferrable to the new buyer.
I am thinking of selling the house and moving to a different place with 9-10 rating schools as elder kid is approaching elementary levels soon.
What I wanted to understand is if buyers would be interested in assuming this loan and how much premium would they pay?
I calculated some rough numbers:
*Current value: 1.26 Mill as per Redfin.
Loan @2.5% for 25 years ~620k
Monthly mortgage + taxes = 3900-4000 per month
Pge - 0 as I’m on NEM2, except for January when it’s whatever usage that 1 month.
Gas - 20$ as only water heater uses gas, rest all appliances are on electricity.
Water - 80-90 per month
I have 1 EV that I charge at home (Nissan Ariya) so no need to pay for it either as all excess production is good enough to cover for charging the EV + some years I get 200$ checks from pge.
All the numbers for utilities stay the same for the most part for the buyer unless his usage is crazy high.
Potential scenarios:
Scenario 1:
If a buyer were to say pay the fair market value or 1.25mill with standard 80/20, say he gets a 30 yr at 5% (even though it’s more of a ARM rate and 30 yr fixed is trending more like 6% for jumbo loans)
Downpayment - 250k
Loan - 1 million @5%
Monthly mortgage - 5368
Taxes - Separate but possibly around 1350 per month
For me, if I cut agent fees and stuff 6% from 1.25 -
I walk away with ~550k after deducting everything. The buyer still gets it at market rate.
Scenario 2:
Buyer assumes my mortgage but I charge 1.35mill instead of 1.25, downpayment and everything still stays relative at 80/20
Downpayment: 270k
Loan 1: 620k @2.5% for 25 years
Loan 2: 460k@5%
Total still comes to 5250 but higher amount loan ends 5 years earlier.
Taxes - 1480
After cutting 6% for agent fees and all from 1.35 and deducting everything, I walk away with ~645k
Buyer saves 5 years on primary loan + 100$ less per month but has to pay more in taxes so mortgage stays pretty much the same.
I’m trying to put myself in buyer’s shoes and checking if this math makes sense or if I’m asking too much as over the period of next 20-30 years, the buyer saves a lot on total interest paid, I get some premium for locking in a loan at a pretty good rate and the buyer always has the options to pay down the higher interest loan first to save more I.e multiple options to save atleast another 200+k on interest over the total timeframe of the loan.
Even if the rates go down soon, it’s hard to see 30 yr fixed rate at 2.5% anytime soon.
What do you think?
Note: I’m not trying to sell my house here, this is purely for discussion and getting guidance.