Hi, this is interesting! I'm trying to use some creative Financing, so I wonder can someone takeover someone else's mortgage? I mean for example; I bought my property last year for $100,000 and I put down $25,000 down. My monthly mortgage is $360. Can someone approach me to takeover my mortgage and continue paying my $360 a month and pay me my downpayment plus $10k or whatever?!
If that is so, who would you need to be on your team for such a transaction being in the buyer's shoes; Accountant, Attorney...or who would do the financing to make sure the transfer goes right and clean?
Any thought on this scenario, if someone did similar transactions? Thanks
@Michael Ramzy Yes. It's called a "Subject To" transaction. You can search Subject To and find more than you can imagine here on BP.
I coach subject to and you never sell on subject to, ever.
Subject to is where you buy turns and promised to make the payments but the seller keeps the loan in their name
Look at selling on lease purchase where you get a large down payment and you put into a lease with the tenant buyer. If the tenant buyer defaults and doesn't buy, you keep the earnest money
If you're in Canada see a Canadian commercial attorney that specializes in leases
I would never sell subject to. You leave yourself with all of the liability "mortgage" & give the seller the entire asset "house"
Leaves you at way to much risk.
Not sure how they do things in Canada but most mortgages in the US have a due on sale clause, which means that whenever you convey the ownership interest in the house to someone else, the mortgage accelerates and becomes due immediately.
In Canada, you will be running a high risk the lender will exercise their Due on Sale provisions if they get a whiff of a wrap/subject to arrangement.
If your mortgage is assumable - many are, but at the discretion of the lender - then you may be able to have the purchaser assume the mortgage as part of the purchase of the property. The lender is more likely to allow this if the purchaser is to be an owner occupant.
This info based on Ontario Canada rules.
Short answer is yes. This called an Agreement For Sale. Highly popular in the seventies around the Toronto area. Due to lenders not lending, high rate mortgages and properties no selling. I only know of two lawyers in the area that will even have the conversation about them now. Most lawyers have never heard of them and when explained won't touch them.
The concept is ownership of the home transfers but title does not until sometime down down in the future. Usually when the mortgage is up for renewal. The original owner remains on title and keeps the mortgage in his name. Not many sellers are keen to do that especially in a hot sellers market.
On the flip side about 1/6 of mortgages are assumable providing the new buyer qualifies for it.
Yes, its called a 'mortgage assumtion'. The mortgage is transferred in the name of another person and he starts making payments for the remaining part of the loan.
@Brooks Rembert thanks for the keyword. That was very helpful!
@Fred Heller Glad to know the "due on Sale' clause.
Now, Can I raise the bar a little bit and make the scenario a bit complicated? The seller is in Florida she just bought the property and had her mortgage 3 months ago! Now the buyer is a non-U.S. resident. I guess the buyer has try to know if the seller's mortgage is assumable. Let's say; it is! Is that still possible? Does it now depend on the seller's lender and their terms and conditions or what?
if it is a USA govt FHA or conventional loan definately not assumable
If it is a private mortgage like a private sdira loan maybe
Why are you asking this? Is this a real situation?
Is the property in Ontario or the U.S.A.?
I coach creative financing
in the USA, in FL, anyone can buy sub2, wrap, land contract, land trust, etc
Doing it long distance is tough, generally it is face to face negotiation
Get a realtor license in FL if wholesaling paperwork
Originally posted by @Michael Ramzy :
@Roy N. The property is in the U.S.
@Brian Gibbons at this point nothing happened, just thinking of different paths!
Then put what @Gary McGowan and I conveyed into your back pocket as things will be different. If the vendor's mortgage is assumable, I suspect the lender will not be keen on it being assumed by a foreign national.
The good news, you are playing in Brain Gibbon's sandbox, so he can give you ideas on how to approach the situation.
Yes the website has basics on lease options, sub2, wraps, land contracts, private lending, jv partnering, and more. (USA not CA)
Glad you like it!
PS I have CA training too in case you want to learn there.
Yes, but you have to be careful. You're on the hook until the mortgage gets paid off. Best of luck!
Seems like that! @Rachel H. Thanks
@Gary McGowan I had a bit of a laugh when I read your post...I just went through the 3rd phase of my real estate exams and they actually had two questions on Agreement For Sale. With OREA on our side teaching agents how to buy and sell properties, it's no wonder there is only a handful of agents who actually know and understand investing, flipping, and the like.
I've flipped houses with some pretty creative financing in my 10 plus years and assuming a mortgage was only one of them. I even did one on a rent to own until I finished up a flip. Once I started working on the rent to own I had my private money guy come on board to prevent any issues with insurance etc. as a flip can get messy if you don't.
The one thing I can say for sure is that the rules in Canada are much different than the rules in the US and @Roy N. certainly seems to know his stuff when it comes to both. You've received some good advise from everyone and the only thing I can say is take some time to think things over, but in order to really make anything happen you've got to take action. If you get shut down the first time, figure out another way. You'll learn regardless and push ahead to bigger and better things.
Nothing is better than real world experience...good luck!
thanks @Dave Vogt . That's true.