It’s the same as one mtg.....the purchase price has to cover the total owed plus whatever the seller needs.
@TamaraFaye Smith The purchase price and any existing mortgages are separate thing. To make it work out in the easiest , most conventional sense, though, the purchase price must exceed the payoffs of the existing liens (mortgages, taxes, municipal, etc). If the liens exceed the purchase price and a mortgage is involved, your hope is to do a shortsale.
If there are no other loans currently on a property, the old 2nd mortgage becomes the 1st mortgage.
When explaining this to the seller, agree on your purchase price and let him know that the mortgage being paid off will come out of his proceeds. The seller will receive the purchase price minus the payoff minus the sellers closing costs. Or you could do the math for him and tell him what he will net. Whatever gets the deal done!
No. If a person has a “second”mtg, that means they also have a “first” mtg....they have 2 mtg.s at the same time. Both must be paid off when the house is sold.
Originally posted by @TamaraFaye Smith :
@Andy Mirza okay thank you! I understand the two being separate now and the purchase price has to exceed anything owed. But what I’m still a little confused about is if the owner of the home has a second mortgage on it then doesn’t that mean he is paying a bank for his home? So a bank is involved? I’m asking because my preferred route was to go with no banks to eliminate time and more paper work. Also what is the difference between a 1st mortgage and a 2nd one? A second one is taken out after the first is paid off?
I made an assumption from your OP that the owner paid off the 1st mortgage since you said that no banks were involved. I further assumed that the 2nd you mentioned referred to another loan the owner took out. To clear things up, do you know exactly how many loans are on the property? If there is only one, then that’s the 1st. If you have two mortgages, the one that was recorded “first in time” is the 1st and the one recorded after that is the 2nd.
If the 2nd was taken out after the 1 st was paid off, then it would be a 1st and not a 2nd