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who benefits: the buyer or the seller?

who benefits: the buyer or the seller?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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16) In the past a common practice for selling a home was to allow the buyer to "assume the mortgage" this meant that the buyer would be able to take over the existing mortgage of the seller. The advantage of doing this was that the existing mortgage might have a lower interest rate than the current mortgages. Suppose that a seller of a home has an interest rate of 3% on his existing mortgage and it is locked in for the next 5 years. Suppose also that the best interest rate buyers can ger for a new mortgage is 6%. If the mortgage is assumed by the buyer, who benefits: the buyer or the seller? Explain
Transcribed Image Text:16) In the past a common practice for selling a home was to allow the buyer to "assume the mortgage" this meant that the buyer would be able to take over the existing mortgage of the seller. The advantage of doing this was that the existing mortgage might have a lower interest rate than the current mortgages. Suppose that a seller of a home has an interest rate of 3% on his existing mortgage and it is locked in for the next 5 years. Suppose also that the best interest rate buyers can ger for a new mortgage is 6%. If the mortgage is assumed by the buyer, who benefits: the buyer or the seller? Explain
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