Seller Financing Questions
I have a couple questions regarding seller financing after you complete the deal: One, if you have a balloon payment say at 5 years how do you properly refinance into a conventional loan if that is the path you want to go? If I go to a bank and say I have a loan out with this specific individual will I be able to retrieve a loan from the bank (with the right credit, Debt to Income Ratio, etc.) that will assume the rest of the loan from the initial seller financing lender? Does this person who financed the house to me initially then get a full payout of what is left on the loan (Interest/Principal included)?
Secondly, can you use conventional HELOC's or Lines of Credits on properties owned through seller financing? If not, can you seller finance HELOC's? Has anyone ever had experience with this in the past?
Thanks for all the help
@Darien Miller-Gowan if the balloon is in 5 years you would refi it just like any other refi. The new bank will pay off first position (they seller carrying the note or who ever they sold it to), and then take a new first position. The payout will depend on what was agreed to but most common is the principal balance.
Yes you can still get second position debt (HELOC and home equity loans). Don't over think seller financing, it is nothing more than a 1st position lien. (unless they are carrying in a second position.)
Best of luck!
For the first part, is it seller financing or Subto? The way it's phrased makes it seem like it's more Subto rather than seller financing.
For the second part, I'm not 100% sure what you mean. Do you mean you getting a HELOC or the existing owner?
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#1 Personal Finance Contributor
- Rental Property Investor
- East Wenatchee, WA
Quote from @Chris Davidson:
@Darien Miller-Gowan if the balloon is in 5 years you would refi it just like any other refi.
True if you actually own it. 'Seller Financing ' is very broad. If a contract for deed or land contract was used, you own nothing and would have to purchase it. Doh!
@Darien Miller-Gowan yes they would just get paid the remaining principal on the seller financed note. You just have to have a strategy. Once you get 10 properties with conforming loans you can not obtain more conforming loans in your name (from my understanding). After 10 you need a non-conforming loan like a portfolio lender, or DSCR loan, etc.
Depending on the type of seller financing you do, the deed to the property is in your name. Bank doesn't care who holds the note as long as an appraisal shows there is equity and ypu are the owner. I belive america first credit union has an investment property 2nd position loan you can take out up to 80% LTV of the property.
Thanks to both of you guys! This information was extremely helpful. Do either of you know anyone in Denver, CO by chance who does this type of creative financing that I could get in touch with?
@Darien Miller-Gowan I don't personally know anyone in your area. However if I was in your shoes, I would hit up some REI meetings, a title company, find local investor facebook pages, see who is offerings creative terms on deals, or what ever it takes to find them if this is what your are wanting to do. You will puck up a few things along the way to trying to find who is active in your area and be able to contribute more to the conversation once you have it.
Best of luck!