Money Management

If you have an assumable mortgage, you might find selling your home much easier. Read on to find out why. 

If someone is in the market to buy a home today, you might think they’ll be stuck paying about twice the average mortgage rate of a couple years ago. But if the home has an assumable mortgage attached to it, that might not necessarily be the case.

Assuming a mortgage means that a mortgage is transferred from the original borrower to someone else. In other words, the standard sequence of events when you sell a house is that your existing mortgage is paid off with the proceeds from the sale, and the new buyer will then apply for and receive a new mortgage loan. With an assumable mortgage, the buyer will simply take over the existing mortgage, transferring the loan into their name and removing the original borrower’s.

When a mortgage is assumed, all of the loan terms remain the same, including the outstanding principal, remaining loan term, interest rate, and monthly payment. The only thing that changes is the person responsible for making payments.

Benefits and drawbacks of assumable mortgages

This can be a major selling point if you bought your house with an assumable mortgage with a low interest rate. For example, if you can offer an assumable mortgage with a 3.5% rate and new mortgages are being offered with a 6.5% interest rate, it can make your home much more attractive to potential buyers.

Assumable mortgages aren’t always ideal. For example, if you’re aiming to sell your house for $500,000 and only owe $300,000 on your assumable mortgage, the buyer will still need to figure out where the other $200,000 is coming from, which means either a separate loan or a larger down payment.

Can your mortgage be assumed by someone else?

The short answer is “it depends.” Not all mortgage loans are assumable, and even if yours is, the new borrower will need to meet certain qualifications before assumption can take place.

The bad news is that conventional mortgage loans are generally not assumable. However, several other types of loans are, specifically the three major types that are backed by government agencies:

FHA loans: All FHA loans are assumable, but the borrower must meet the same eligibility requirements as a new FHA loan applicant, such as a credit score of 580 or more with less than 10% down and a debt-to-income ratio of 43% or less.

VA loans: VA loans are particularly interesting because they are assumable even if the new borrower never served in the military. To assume a VA loan, a borrower can use their own VA loan eligibility in place of the seller’s or can meet the lender’s financial qualifications to apply.

USDA loans: USDA loans are government-guaranteed mortgages that can be used to buy homes in certain rural areas and can be assumed by a buyer that meets the USDA and lender’s qualification requirements.

Why an assumable mortgage can be such an asset

The most obvious benefit to an assumable mortgage is that a buyer could potentially obtain lower-cost financing than is available on the public market.

Consider this simplified example. Let’s say that a couple is in the market for a $400,000 home and has 10% of the purchase price to use as a down payment, so they’ll need a $360,000 mortgage. At a 6.5% interest rate, they would pay $2,275 per month towards principal and interest on a 30-year mortgage, or $819,000 over the term of a 30-year loan.

On the other hand, if they could find an assumable loan with a 3.5% interest rate, a $360,000 remaining balance, and 20 years remaining on the term, their monthly principal and interest payment would be about $2,088. Not only would their total house payments total just $501,120, but they would own their home free and clear 10 years sooner.

Assuming a mortgage can also save the buyer significant amounts of money when it comes to fees and closing costs. To be clear, there are costs involved with mortgage assumption, but they are typically much lower than obtaining a new mortgage. For example, USDA loans typically have closing costs no greater than one-third that of a new mortgage. VA loans typically require a funding fee equal to 1.25% to 2.15% of the loan amount, but this is just 0.5% for mortgage assumption.

What it could mean to you

Of course, every circumstance is different and there is a lot that determines how attractive your home might be to potential buyers. But in many cases, having an assumable mortgage can be a big selling point that you may want to take advantage of when it comes time to sell.

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Starting to plan your wedding, but worried about the cost? One writer shares how she and her partner planned a wedding for less than $10,000. Find out how. 

When my husband and I started planning our wedding day, we wanted a memorable celebration but didn’t want to go into debt. As we organized our special day, we made some creative choices that allowed us to keep our total spending below $10,000. Our wedding day was almost 10 years ago now, but some of our planning choices may inspire you as you plan your wedding.

Choosing a non-traditional venue may offer savings

There are some incredible wedding venues all over the United States. But many wedding venues charge thousands of dollars in rental fees. According to a study by The Knot, the average wedding venue cost was $11,200 in 2022. Wow!

As we looked at venue options, we were shocked at the prices. We were uncomfortable paying thousands of dollars to rent a space for a few hours. Luckily, we planned to make some non-traditional choices, so hosting our wedding at a local park made sense. We paid less than $500 for a cabin rental with a liquor license included.

As you explore venues, don’t be afraid to think outside the box. Many county and state parks rent cabins and other covered structures for affordable fees. Another idea is to host a backyard wedding if you have a big yard or have a family member with a lot of property. Going with one of these options could free up more room in your budget for other wedding day expenses.

Your event date can impact price

Another way we saved money was by choosing a less popular day and time for our celebration. Saturday evenings are one of the most popular times to get married, and because of this, many venues charge higher fees for couples who go this route.

We knew we wanted to get married on a weekend, as we had some guests traveling a few hours by car, but we didn’t feel the need to go with a traditional Saturday evening event. Instead, we hosted a Sunday brunch reception. We said our vows at noon and enjoyed a brunch spread shortly after with our guests. We wrapped up the event about three hours later.

This choice didn’t save us money on venue costs, but it saved us money in other ways, which I will highlight below. Some couples could save money on venue expenses with a non-traditional approach. Consider being flexible with your event time and date to save cash.

Food and drink choices can help you trim your spending

Our decision to host a brunch celebration helped with food and drink costs. We had our brunch reception catered. We had a variety of breakfast and brunch-themed food options, as well as non-alcoholic and alcoholic beverages and a free-flowing bar.

We also saved money by narrowing down the available alcohol choices. We chose one type of beer, served red and white wine, and had mimosas. I don’t remember the total spend, but it was affordable, especially compared to what we would have spent to serve booze at a traditional venue. Since we had a liquor license for the day, we hired a bartender friend to pour drinks.

Cheaper photography and music options may exist

We also saved money thanks to our photography and music choices. We didn’t feel the need for video footage. Instead, we hired a professional photographer to snap photos. We chose a photographer who was still growing her business and was offering an affordable package. After looking at her portfolio, we hired her. We spent under $1,000 for professional photos.

We also went with a non-traditional music choice. Instead of hiring a pricey DJ, which didn’t fit our Sunday afternoon brunch vibes, we hired a local musician to play acoustic guitar. It was perfect for the occasion and the price didn’t drain our checking account.

Find ways to save money on wedding costs

Making creative choices can help you save money as you plan your special day. There is no one way to host a wedding and or set rules you must follow. If you want to celebrate your commitment to each other while working on crucial personal finance goals, don’t be afraid to think outside the box when making planning decisions.

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Need to borrow money? Read on to see if you should tap your 401(k) or take out a personal loan instead. 

If you need money and have been toying with the idea of taking out a personal loan, you’re probably not alone. U.S. personal loan balances reached $222 billion by the end of 2022, according to data from TransUnion, so clearly, they’re a popular borrowing choice.

But what if you happen to have money socked away in a retirement savings plan? While you generally cannot take a loan from your IRA, some 401(k) plans do allow you to borrow against your balance.

But is that a smart choice? Or are you better off taking out a personal loan?

The danger of 401(k) loans

When you take out a personal loan, you’re going to end up getting charged some amount of interest that your lender will make money on. When you take out a 401(k) loan, any money you’re forced to repay is money that goes back into your personal account. And you might prefer to pay yourself back than pay a lender back.

But while a 401(k) loan might seem like a great solution when you need to borrow money, there are certain pitfalls you might encounter. First of all, if you don’t repay your 401(k) loan on time, it will be considered a withdrawal from your retirement plan instead. That could prove very problematic if you’re not yet 59 1/2 years old. Withdrawing money from a 401(k) plan prior to that age generally means facing a 10% penalty on the sum you remove.

Also, if you have your money in a traditional 401(k) and your loan ends up getting treated as a withdrawal because you don’t pay it back in time, you’ll face taxes on your withdrawal. This isn’t a penalty — it’s the same taxes that would apply during retirement. But it’s another financial hit nonetheless.

Plus, if you don’t repay your 401(k) loan as you’re supposed to, you’ll leave yourself with that much less money in your account for retirement — the period of life that money is supposed to be earmarked for. That could mean struggling financially once your career comes to an end.

Repaying a 401(k) loan may be tougher than you think

Clearly, there are consequences to not repaying a 401(k) loan. Now, you may be thinking, “Well, that won’t be a problem, because I’ll make sure to pay that loan back.”

But what you may not realize is that if you leave the company sponsoring your 401(k), your repayment window might shrink to as little as 90 days. And that scenario might occur even if you’re terminated due to no fault of your own, such as if your employer decides to downsize and your job lands on the chopping block.

That’s why a better bet may be to take out a personal loan, even if that means having to repay a lender and losing money to interest. If you have a great credit score, you might manage to qualify for a relatively competitive rate on a personal loan. And while there can certainly be negative consequences to falling behind on personal loan payments, like massive credit score damage, you won’t necessarily face the same level of penalties as you might for falling behind on a 401(k) loan.

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A writer explains why she opts not to skimp on emergency savings. Read on to learn more. 

You never know when you might lose your job or get hit with an unplanned expense your regular paycheck can’t cover. That’s why it’s so important to have money in savings to cover those unanticipated bills.

When it comes to building an emergency fund, many financial experts will tell you to aim for a minimum of three months’ worth of bills. The logic there is that it might easily take you that long to find a new job after becoming unemployed, so you’ll want enough cash to cover your expenses without having to resort to debt.

Financial guru Dave Ramsey said earlier this year that a three- to six-month emergency fund can be considered one that’s fully funded. But some experts have upped their emergency fund recommendations in the wake of the pandemic. Suze Orman, a well-respected name in the personal finance world, says that a 12-month emergency fund is the ideal target to aim for.

I’m more in Orman’s camp when it comes to maintaining my own emergency fund. But I actually have enough money in emergency savings to cover a little more than a year’s worth of bills. Here’s why.

It’s matter of extra protection

Some people might feel that having 12 months’ worth of living expenses in the bank is excessive. And I do think that for some people, a smaller emergency fund will suffice.

But my situation is a little different for a few reasons. First, I’m self-employed. This means that if I lose all of my clients and my income drops to $0 in a short period of time, I won’t be eligible to collect unemployment benefits from my state.

Secondly, I have a lot of expenses to cover that I’m locked into, like a mortgage. When you rent a home and your financial situation worsens, you can seek to break your lease with minimal penalty (sometimes no penalty) or move when your lease is up. It’s a bit harder to unload a house you own.

Also, I’m financially responsible not just for myself, but for my family. That includes my children and the giant dog we adopted a few years ago. I want to make sure I have enough cash in the bank to tide us over if I’m out of work for quite some time.

So why don’t I just stop at a year’s worth of expenses in savings? The reason is that for my own peace of mind, I want enough money to cover 12 months of bills plus some extra cash to pay for things like home repairs and medical bills.

When home repairs arise, I’ll commonly dip into my emergency fund and then try to put that money back when I can. But having that extra padding helps me stay calm when I need to take a withdrawal.

Save the amount that helps you sleep at night

The money I have in my emergency fund is earning some interest, but I could potentially be earning a higher return by investing some of that cash. To me, though, it’s worth it to forgo that higher return in exchange for more peace of mind.

If you’re not sure how much money to keep in your emergency fund, I’d say save whatever it takes to help you sleep easy at night. That may be three months’ worth of bills, six months’ worth, a year’s worth, or more.

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Six million Acorns and GoHenry users can expect more features. Here’s how the partnership could make parenting even easier. 

Acorns, a popular U.S.–exclusive investing app, is branching out. The app offers over 5 million users easy, automated investment strategies. Acorns’ robo-advisory services are more affordable and straightforward than human advisors.

Over the last decade, Acorns has grown its offerings, including retirement accounts and access to a Bitcoin ETF for customers. They’ve even dabbled in custodial accounts through Acorns Early, which lets parents make tax-advantaged investments for their kids.

This month, Acorns doubled down on appealing to parents who want their kids to be financially savvy. It acquired GoHenry, a U.K.–based app that helps parents teach their kids financial literacy by providing 6 to 18-year-olds with debit cards, paid chores, and more.

Customers can rest assured their app won’t disappear into the interwebs. The acquisition is being branded as a partnership, not a merger. Both Acorns and GoHenry will stick around as separate apps under Acorns’ ownership.

As Acorns thickens its canopy of offerings, consumers can expect to see Acorns expand internationally. GoHenry and Acorns users may see new features coming soon. Current customers can keep calm and carry on as per usual.

What the acquisition means for Acorns users

Acorns hasn’t flagged any disruptions to its service. Chances are, Acorns users won’t notice any disruptions to the app.

In its press release, Acorns CEO states that the acquisition will “accelerate our roadmap” regarding offering financial services for kids. That’s good news for customers unsatisfied with Acorns Early, the company’s current solution to teaching kids financial fluency.

For example, Acorns may bring popular GoHenry features like paid chores and allowance management to the Acorns app. Doing so would make it even easier for parents to teach kids how to manage money.

New customers abroad can expect Acorns to come to them. This acquisition marks the first time Acorns has branched outside the United States, specifically to the U.K., France, and Spain, where GoHenry currently operates.

What the acquisition means for GoHenry users

GoHenry users have no cause for concern. According to a GoHenry blog post, the merger won’t interrupt regular app usage. U.S. users will see GoHenry rebranded to GoHenry by Acorns in the app store.

The most notable thing GoHenry has revealed so far is that the partnership between the fintech companies will create new opportunities for customers to save and invest. For example, GoHenry may integrate core Acorns features, like the stocks investments and round-ups, combining the best parts of both platforms.

A robo-advisor can make parenting easier

Acorns appeals to beginner investors who prefer simple strategies over nitty-gritty ones. By expanding features offered to parents and minors, Acorns makes it easy to save early.

There are alternatives to using robo-advisors like Acorns. Some parents prefer to teach their kids with cold, hard cash. Cash strategies benefit kids, who understand transactions more intuitively when they see green bills exchanged for candy bars at the grocery counter.

There’s nothing stopping parents from using both strategies. Parents can combine the convenience of automated money management with intuitive, real-world examples of how money actually works.

For example, parents can mix and match digital banking with trips to physical banks, grounding money in its historical context. Parents can have their kids exchange physical cash for digital cash on an app. By linking physical to digital value, parents prepare kids for modern finance.

Acorns is just one of many companies that offer simpler money management. Shop around to find a money-management service that works for your needs. The best robo-advisors let hands-off users grow their money without thinking about it.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin and Intuit. The Motley Fool has a disclosure policy.

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Are you feeling worried after using up all your life savings? Suze Orman says having the right mindset is key. Find out how it can help you get ahead. 

Financial guru Suze Orman answers questions from listeners and gives valuable advice on her podcast, Suze Orman’s Women & Money. Recently, a listener shared her experience of depleting her savings while navigating a stressful life event and asked how she could move forward. Orman offered solid advice to help anyone who has spent their savings on costly life events or gone through difficult financial situations.

If you’ve used up your savings, there is a path forward

Life is expensive, and no matter how well we plan, unexpected expenses come our way. Using money from your emergency fund to cover costs can make the situation less stressful. But what happens when you no longer have extra savings in the bank and fear additional unexpected bills coming your way? Orman suggests that your mindset can make a difference.

In a recent episode, a listener asked for guidance about navigating life after using up most of her savings. She used her retirement account savings, kids’ college savings, and regular savings to cover legal and living costs while battling a custody battle. With only $10,000 left in her savings account, she was feeling stressed about future costs that might arise. With life being so expensive, she also worried that she would be unable to save more.

Orman noted that there’s no benefit in regretting past financial decisions or money spent. If you continue to dwell on the past, it can make it harder to move forward. Instead, she suggested focusing on the good instead of the bad and creating a new plan for the future.

Orman said, “There is a law of money; look at what you have, not at what you had, and that applies to everything in life. Be careful about the words that you use because your words become your actions, your actions become your habits, and your habits become your destiny.”

She continued, “I want you to make a promise that every single day you will write down 25 times. You will say it silently to yourself 25 times. You will scream it in your car 25 times the following, ‘I have more money than I will ever need.’ Anytime you get afraid, and you think that you can’t, let your thoughts tell you that you can.”

Pay attention to your money mindset

Orman’s guidance is useful advice for anyone going through a tough time financially. We all make mistakes in life, and many of us have made our fair share of financial mistakes that cost us a lot of money. But that doesn’t mean that we can’t move forward. Your current situation doesn’t have to be forever. It may take time to get to where you want to be, but it’s possible.

If you’ve recently gone through a difficult financial situation, knowing and believing there is a path forward can do wonders. It’s okay to take some time to come to terms with money spent and any difficult financial chapters that you’ve experienced in your life. But don’t let your past challenges take hold of you and shape your future forever.

Take time to remind yourself of the good that you have. Then, decide how you’ll grow from the situation and outline new financial goals. If it feels overwhelming, start with small goals first. You don’t have to make big steps all at once. Learning more about financial planning can also help you achieve your goals sooner. Check out our personal finance resources to learn more.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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