If you have a VA loan, you have a built-in advantage over other sellers in your neighborhood. You may remember that your VA loan is assumable so someone else can take over payments if they wish. So if you took out the loan or re-financed when rates were below 4%, your mortgage is already looking pretty attractive and will likely look even more attractive over the course of this year and the years to come. Why? Because interest rates are going up!
What does this mean for you as a seller?
You can ask for a premium for your home simply because the buyer can get a lower interest rate, which means a lower monthly payment for the buyer. If you have had the loan for more than 5 to 7 years, the buyer also benefits from the payments going mostly to principle rather than mostly interest. By the 10th year, this change is most noticeable. Here, too, the seller can expect some additional compensation.
What is the downside?
If the buyer is not Active Duty or a Veteran, you will need to leave your Certificate of Eligibility tied to this home you are selling. Thus, to make this worthwhile for both parties, the seller needs to net 20% to 25% percent of down payment on their next home. A complicated task as you may not have identified your new home yet. If you are moving out state, with a few exceptions, you can easily net 25% and perhaps even more. With such a large down-payment, there will be no mortgage insurance even though you may not be using a VA loan.
And if the buyer is also Active Duty or a Veteran, they can substitute their Certificate of Eligibility for yours, giving you the benefit of the full borrowing power when you buy your next home.
All of this may sound confusing, and there are details to navigate carefully if you want to make sure this is truly a benefit to both parties. Call/text 760 622 5087 (or e-mail me at [email protected]) for an appointment where we can discuss your situation and how to make this work all around.
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