Best ways to structure deal on Home with mortgage

6 Replies

Hello All,

I am running into an issue and would like some clarification if there is anyone that can help. I am coming across some good leads that need rehab work done but some of them have a mortgage. I would like to structure seller financing but I do not have enough of a down payment to cover the existing mortgage and fund the rehab. I do not want to risk running into a Due On Sale clause that may pop up on a seller financing deal with a bank mortgage. What are some strategies that can be utilized to get into the home and pay a monthly payment while I rehab?

I am thinking a land contract, or some sort of lease option but a lease option may not work do to the extent of the rehab. Is there something that I am not seeing or can this even be done?

Any and all feedback are welcomed. 

Thanks

You could always try "subject to" where you take over the payments (and the title) of the property. Typically you would pay the homeowner a portion or all of their equity up front but you may be able to negotiate an agreement to pay that money to the homeowner after it is sold. Because you will have the deed/title there is no worry in rehabbing the property and then the seller backing out on you.

It is possible. From what I understand listening to the podcasts though, that is pretty unlikely. As long as the mortgage payment is being made, they don't pursue it. Again, that's just what I've heard. You should search/ask around if anyone has run into that issue. 

@Brad Bellstedt thanks for the input. I don’t want to run that risk even if it is unlikely. I wouldn’t be able to pay the remaining balance in full. In the case that someone did run that risk, who does the payment fall on, the previous owner or the current title holder?

The previous owner. They stay ultimately still responsible for the mortgage payments/loan throughout the process until the property is sold. Could you not sell the house for more than what they owe? If so, you have a solid exit strategy should that due on sale clause become an issue.