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My current mortgage is 3.12%. I have $86k left on the balance. Home value roughly $225k.
My question is, in order to attract buyers, could I offer owner financing at say 4.5%? Could I offer this while keeping my current mortgage? Or would I need to pay it off? I could pay it off, that would not be an issue.
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Location: Ocala, FL
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If you sell your house, your current mortgage would have to be paid off at closing. I can't imagine any bank allowing you to keep your current mortgage active when you no longer own the home. Why would they ? Strange question.
You can't technically owner finance since you have an existing mortgage. Owner financing means you sold them the house and you are the bank. If they stop paying you would need to foreclose.
You can do a lease with an option to purchase but the tenant won't be able to apply any of the rent towards the principal. Much safer for you. Nonrefundable down payment and if they stop paying you just have to evict them.
If you have equity in your new home, assuming this is no longer your primary residence, could you take out an equity line to pay off the mortgage?
Is it even worth it as opposed to just selling it outright?
You can't technically owner finance since you have an existing mortgage. Owner financing means you sold them the house and you are the bank. If they stop paying you would need to foreclose.
You can do a lease with an option to purchase but the tenant won't be able to apply any of the rent towards the principal. Much safer for you. Nonrefundable down payment and if they stop paying you just have to evict them.
If you have equity in your new home, assuming this is no longer your primary residence, could you take out an equity line to pay off the mortgage?
Is it even worth it as opposed to just selling it outright?
We have the money to pay off the mortgage, that is not the issue. It's only $86k outstanding.
I wanted to offer a below market rate and play the arbitrage on the two rates. Buyers would win by getting a good rate deal and I win by collecting the difference in rates and being able foreclose if they don't pay.
I'm wondering about lease /option to purchase as I have read about it in the past.
You will not get a closing attorney to record the deed without "insurable and marketable title free of lien or encumbrance."
Conveying with an unsatisfied mortgage lien disqualifies the title as "insurable and marketable, free of lien or encumbrance."
It is a question worth confirming with a closing attorney, who may use different terms.
IF you were able to record, your lender would call the loan immediately.
Location: Sarasota/ Bradenton - University Pkwy area
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Quote:
Originally Posted by wheelsup
Hello,
Any other hazards or issues?
Thanks
The words "owner financing" will most likely attract every loser who can't qualify for a mortgage in today's market, which is already spilling over into the sloppy qualifying standards of the last real estate bust. If you go down that path, you definitely want to do a thorough credit check on the buyers.
Then there's the paperwork. It will take time every month to keep track of the payments. You'll need an amortization schedule to accurately calculate the interest, principal, and remaining balance due. There are also annual 1098 mortgage interest statements to prepare.
You'll also have to worry about the buyer maintaining the property, paying the property taxes and insurance. That means you'll be married to your old home for the life of the loan.
Before entering into a sale with owner financing, you may want to consult a real estate lawyer and obtain legal advice with regard to the financing, disclosure, and repayment requirements that need to be met, and to find out the specifics on what documentation you should have to protect your interests in the deal.
As everyone said above... you can't owner finance while carrying a mortgage. Your loan holder will rightly object to that.
But if you can pay it off, and if the idea of monthly income appeals to you, a private contract can be a good way to go for some sales. There is some risk of course, but the interest rates you can charge are usually at least a point over prime, and with the stock market being crazy the last few months... hard to find investments that can reliably beat that.
As for the bookkeeping part... many banks will offer to manage that part for you through a transaction account, with running balance and amortization totals tracking that will look just like the monthly statement for any loan. Easy.
The type of mortgage you are talking about, a wraparound mortgage, was more popular years ago. Title can be passed with a mortgage still in place, however, most mortgages are due on sale, so the lender can accelerate the loan, if they want.
Talk to a lawyer so you know what the foreclosure process is like in your state, so you know the risks involved. And, if there are other ways to sell with a mortgage still in place, like land contracts.
And, as others have said, finding a qualified buyer is important.
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