Seller Financing a Home with an Existing Mortgage?

Question

I need your help on thinking through strategies to acquire a property via seller financing that still has a conventional mortgage on it. I've heard of wrap-around loans and situations where you take over someone's payment directly to the lender, but I'm not sure if that's the only way to get this done. Here are some particulars on the property:

• - 3bd/1bth SFH- Currently vacant and needs work (amount unknown)- Seller wants what's owed on the property
• - Would receive market rent
• - Good equity

Based on my analysis, this is a can't miss deal and I want to be creative with how I acquire this property. I've used seller-financing before, but never with a traditional mortgage. Any ideas or strategies would be helpful.

Thanks in advance.

Tom S. · Answer

@Kesete Thompkins  I wouldn't assume the mortgage (making their mortgage payments) unless you also take title.  Otherwise you could put money into the home and their mortgage payments, and they could keep the house.  Or there could be a messy legal battle.

Of course, if you did transfer title that could violate the "due on clause" that the bank has.  Personally I prefer to avoid these situations for seller financing.

Kesete Thompkins · Answer

Thanks Chris. In speaking with the seller, I think that we are going to go the route of me assuming the mortgage until I can get the financing I'm looking for with the terms that I want. Time is on my side in this situation, so I'm going to take my time to ensure that I get it right. Either way, it looks like a win.

Thanks for the time and insight. Once I have the deal settled, I'll come back on with an update.

Chris Seveney · Answer

@Kesete Thompkins

Let’s break it down, you want to buy the home.

How you can pay for it is:

1. Private money

2. Bank money

3. Cash

4. Owner financed (Subject to)

Since it appears 1-3 are out, the only option is 4 which is owner financing and since he has a mortgage the only option appears to be subject to.

If you can get a bank or private lender to give you the $ to pay off his loan then you could take title. I don’t see any other options