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Make the rate do the selling by translating it into verifiable dollars buyers can accept.

Byeditorialteam Reading Time: 3 minutes

Key Takeaways

  • Anchor pricing to payment delta, lifetime interest delta, and present value of savings over the buyer’s hold period.
  • Disclose assumptions, asterisks on numbers, and benchmark your comparison to a reputable source (e.g., PMMS).
  • Offer investor-friendly views (DSCR/cap-rate) and owner-occupant views (affordability/DTI). Veterans Affairs

Assumptions & Inputs

  • Balance: $219,000*; Rate: 2.75%; Term left: 25 years.
  • Market benchmark: 6.5%*, 30-year fixed (P&I only).
  • Discount rate for PV examples: 5–8%* (illustrative).
  • Gap options: cash vs second lien at 9–12%* (illustrative). Veterans Affairs

1. What It Is

“Pricing the mortgage” means putting a number on your rate edge and splitting that value with the buyer via a premium that still leaves them ahead.

2. Why It Matters

Without math, a premium feels arbitrary. With math, it’s a transparent trade: you created the low-rate asset; the buyer benefits for years; the premium shares that value.

3. The Math (Side-by-Side)

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Inputs & Formulas

Monthly payment formula; total interest; and PV of monthly savings as in the pillar article. Include a gap-loan module if the buyer needs a second lien.

Example Walkthrough (abbrev., illustrative)

  • Assumable (2.75%*, 25y) → M≈$1,010∗M\approx \$1{,}010^*M≈$1,010∗.
  • Market (6.5%*, 30y) → M≈$1,384∗M\approx \$1{,}384^*M≈$1,384∗.
  • Monthly delta ≈ $374^.
    Assume a 10-year hold and discount at 6%    :
    PV≈∑t=1120374(1.06)t≈$30,500∗\text{PV}\approx \sum_{t=1}^{120} \frac{374}{(1.06)^t} \approx \$30,500^*PV≈∑t=1120​(1.06)t374​≈$30,500∗.
    If your fees and the buyer’s gap-loan costs total $5–8k* PV-equivalent, a $20–25k* premium could feel fair. Adjust to real numbers, not rules of thumb.

Sensitivity

  • Premium capacity rises with benchmark rates and falls when they drop.
  • Cheaper cash to bridge the gap increases buyer PV; expensive seconds decrease it.

4. Rules & Eligibility (Quick Context)

  • FHA/VA: available path (assumable) subject to approval; confirm program fees.
  • Conventional: due-on-sale limits applicability; don’t market a non-assumable loan as assumable. HUD AnswersServicing Guide

5. Steps & Timeline

  1. Pull PMMS and time-stamp it.
  2. Build your one-pager: inputs, formulas, results, sensitivity.
  3. Publish your premium range and leaseback range (if any).
  4. Pre-screen buyers via servicer intro.
  5. Negotiate price with math, not emotion.

6. Risks & Pitfalls

  • Overpricing when rates fall and PV shrinks.
  • Underestimating gap-loan impact.
  • Ignoring program fees (e.g., VA 0.5%*). Veterans Affairs

7. Pricing & Negotiation (Playbook)

  • Lead with PV math + plain English.
  • Offer two packages: (A) Owner-occupant affordability framing. (B) Investor framing with DSCR, cap-rate, and a leaseback rider.
  • Use walk-away and sunset dates tied to rate moves.

8. Templates & Tools

  • PV Calculator (tab 1).
  • Gap-Loan Model (tab 2).
  • Investor DSCR (tab 3).
  • Premium Recommendation (tab 4) with “good/better/best” ranges.

9. Real-World Examples

  • Seller splits ~$30k* PV with buyer, keeps $22k* premium after fees; buyer still enjoys a $374*/mo edge.

10. Next Actions

  • Update numbers weekly until under contract; re-price if PMMS swings. Veterans Affairs

CTA: Join the VIP Interest List on mortgagehandoff.com for verified assumable deals and math-backed seller resources.

FAQs

  1. What discount rate should I use?
    Use a realistic hurdle (5–8%*) or ask the buyer’s advisor.
  2. How do I price if rates drop?
    Re-run PV; consider lowering the premium or adding incentives.
  3. Can I set a fixed premium?
    Yes, but justify it with PV math and disclose assumptions.
  4. Does a leaseback change premium?
    Often yes: investors may pay more for zero-vacancy stability.

Numbers & Assumptions Disclaimer

All example payments, savings, and PV estimates are illustrations based on the “Assumptions & Inputs.” Actual results vary by buyer qualifications, lender/servicer approvals, market rates, and final terms. No guarantees are expressed or implied.

General Information Disclaimer

Educational only; not legal, tax, or lending advice. Transactions subject to lender/servicer approval and applicable laws.

References

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