Look for a Seller to Carry Back Creative Paper Part 2
Perhaps an example will help. The seller wants $200,000 for the property and currently owes $100,000 on an assumable loan. The seller’s payments are $600 a month. You assume the seller’s mortgage and begin making the seller’s old $600-a-month payments.
The seller gives you a second mortgage for $100,000 at 7 percent for three years with no payments (all due in three years). What are your total payments on the $200,000 property?
If you answered $600 a month you’re right. Of course, you’ve only got three years. At the end, you owe more than you borrowed because interest has been added on to the second mortgage. You’ve probably got to sell or refinance. Nevertheless, it’s three years of low payments during which time anything can happen.
Why would a seller be so generous? Maybe the market’s tight and he or she has to sell quickly because of a divorce, loss of employment, or anything else. Who knows what motivates a seller?
No, certainly not all or even most sellers will accept this type of offer. But some will. Variations of this type of creative financing are endless. They include getting the seller to carry the entire purchase price (100 percent LTV loan), which means you put nothing down and have no monthly payments!
Or getting a small new institutional loan and having the seller carry the balance with no payments on a second mortgage.
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