Seller Finance wrap around

[Adriana Rego]

Don’t know much on seller financing or how it’s reflected in the closing so any info even basic would be appreciated.

I have a deal where it would be seller finance I’d put 25% down - on $275K with balance 30 year amortization 5 year ballon.

Here’s what worries me they have a mortgage already on the property and plan a wrap around where they pay their debt and keep the difference.

My worry is - what if I pay them and they don’t pay the original mortgage? It’ll of course affect their credit but more importantly there is a lien on the house right?

Any and all info appreciated

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Quote from @Adriana Rego:

Don’t know much on seller financing or how it’s reflected in the closing so any info even basic would be appreciated.

I have a deal where it would be seller finance I’d put 25% down - on $275K with balance 30 year amortization 5 year ballon.

Here’s what worries me they have a mortgage already on the property and plan a wrap around where they pay their debt and keep the difference.

My worry is - what if I pay them and they don’t pay the original mortgage? It’ll of course affect their credit but more importantly there is a lien on the house right?

Any and all info appreciated

First, use a title company and an escrow company.

If they do a Wrap and don't pay on their mortgage, the lender could foreclose.  That means you could lose everything. At the very least you'd have to sue to keep you interests intact. 

If you involve the lender, and they find out the title has changed hands, they have a right, but not an obligation, under the Due on Sale clause, that once again, they could foreclose.

To protect yourself, your payment should go to a loan servicer, who pays the mortgage and anything left over gets sent to the seller. And, you should be prepared to have to quickly refinance in the event the loan gets called due.