Mix of Mortgage & Seller Financing

5 Replies

Hey everybody, quick question.

If the seller is carrying 55% of the Note on a property and I am mortgaging the rest, how does the mortgage get secured? I cannot use the actuall property, correct?  If it fails, wouldnt the sellers loose their property?

Thanks

The bank will usually want 1st position on the mortgage, and might allow a seller second.  Talk to your lender and explain what you are trying to do.

But wouldnt the seller reject such an arrangement? They would be taking second place on their own property. If I barely got them to carry the note. 

Depends on the seller. That's why I would suggest talking to a few lenders, particularly credit union's and lenders that keep loan's in house. If there is no current financing on the property, I guess it would be possible to find a lender that would be willing to do a 2nd or LOC on the property. The best situation with seller financing is to give them a DP that they are happy with, say 15-20%, then a 3 year balloon, which should give you enough time to build equity in the property and roll it over to conventional financing.

Agreed but its the DP that I am having trouble comming up with. If I borrowed the DP, then I would have leveraged practically 100% for the property. 

In other words, you have no money?

This is a piggyback loan situation.

Bank makes first mortgage and the seller get that money at closing.

Seller carries back a second, that is an equity loan based on the sale price.

The bank will require you to have skin in the game, generally 10% down.

Otherwise, the seller needs to refinance and then sell as a sub-2, sounds like your seller isn't that motivated.

The seller could finance the whole thing and sell the note or any part of it.

Get another lender to make a second purchase money loan. :)

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