New Mortgage Creative Real
Estate Financing
Technique #1...
A new mortgage
works well when the
seller owes nothing
on the property or
when the amount the
seller owes is not
greater that 40% of
the value of the
property; however,
you must have a
flexible seller who
is willing to help
finance the
property.
For example,
assume the seller of
a $50,000 house has
an existing loan of
$12,000, is looking
for a $15,000 down
payment, and is
willing to carry the
financing for the
balance of $23,000
($50,000 less
$12,000 less
$15,000). Simply
obtain a new first
mortgage for
$27,000, which can
pay off the existing
$12,000 mortgage and
give the seller
$15,000. Next, give
the seller a second
mortgage in the
amount of $23,000.
The $27,000 first
mortgage plus a
$23,000 second
mortgage gives the
seller his of her
total asking price
of $50,000.
A seller who may
be initially
reluctant to accept
this offer may
ultimately agree to
accept an offer with
more cash up front.
For example, obtain
a new home loan in the
amount of $35,000,
giving the seller an
$8,000 larger down
payment than
expected, or a total
of $23,000 ($35,000
new mortgage
proceeds minus
$12,000 old mortgage
pay-off).
Some sellers have
been known to join
the buyer in signing
a note and mortgage
at the bank. If the
buyer does not have
sufficient credit to
get a new mortgage,
the seller, in
effect, loans his or
her credit to the
buyer.
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Example
Summary
Technique #1
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New
Mortgage
Pay Off
Existing Loans
& Provide
Down Payment
Money
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What
You Need To
Begin:
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Good
Credit
Flexible
seller to
finance
property
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Summary
Of Terms:
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Asking
price
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$50,000
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Existing
price
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$12,000
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Required
down payment
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$15,000
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Loan
extended by
seller
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$23,000
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Procedures:
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Obtain
new first
mortgage
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$27,000
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Pay
off mortgage
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$12,000
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Give
balance to
seller
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$15,000
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Obtain
second
mortgage from
seller
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$23,000
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Results:
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- The seller receives
total
asking
price and
entire
down
payment
needed.
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- The buyer has a
creative
no money
down deal.
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Specific
Situations to
Apply
Technique #1
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The
Property (has
or is)
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Property
Offered Below
Market
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Low
Mortgage, High
Seller Equity
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Extra
Lot
or Personal
Property
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Owned
Free and Clear
No Mortgages
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Low
Interest
Assumable
Mortgages
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Existing
1st or 2nd
Mortgage
Private
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Unused
Room (s) that
Could Be
Rented
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The
Buyer (has)
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Cash
for only part
or Down
Payment
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No
Cash at All
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Lump
Sum Cash Due
Soon
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Poor
Credit
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You
Know People
With Cash to
Invest
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The
Seller (has)
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Outstanding
Financial
Obligations
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Must
Sell
Immediately
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Will
Rent or Sell
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Moving
Out of Area
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New Mortgage
to Interest Rate
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