Vendor carries the mortgage question

[peihouserental]

Hi,

There is an ad in our local classifides that reads...."3000 Down Payment, $131,000 selling price.... 3 + 1 Bedroom, 1100 sqft, $505 P.I. or $693 P.I.T. $124450 Mortgage, 3.04%, $3550 Further Downpayment on Possession for a Total of $6550, Vendor will Carry Existing Mortgage with NO BANK QUALIFYING, Rented for $880 Plus Utilities"

I thought before I contact him I would ask a few questions here.
1. Typically does the vendor carry the mortgage until it is paid off or just to term. This would be my biggest concern because I would only do this if I didn`t have to qualify for the mortgage in a year`s time and end up having to sell it, possibly for a loss. I was just wondering what is "normally" the deal.
2. Do lawyers draw up the papers to switch title to us and set the bank as the 1st lien holder.
3. If I purchased this, would I pay the bank the 693 or would I pay the vendor. Just wondering who makes sure the mortgage is getting paid properly.


Thanks in advance,
Greg

 

[Thomas Beyer]

QUOTE (peihouserental @ Jun 14 2010, 07:32 AM) ... Vendor will Carry Existing Mortgage with NO BANK QUALIFYING ....
1. Typically does the vendor carry the mortgage until it is paid off or just to term. This would be my biggest concern because I would only do this if I didn`t have to qualify for the mortgage in a year`s time and end up having to sell it, possibly for a loss. I was just wondering what is "normally" the deal.
2. Do lawyers draw up the papers to switch title to us and set the bank as the 1st lien holder.
3. If I purchased this, would I pay the bank the 693 or would I pay the vendor. Just wondering who makes sure the mortgage is getting paid properly.
Vendor carries assumes an Agreement for Sale. This means you will NOT go on title as owner, just as a caveat holder. Otherwise it would be called an assumable mortgage. maybe this is what the seller means. Find out. Thus, first find out if seller stays on title or if you go on title as the new owner !

Re mortgage length: you do what is agreed on. Most sellers do not carry for 25 or even 35 years, but for 1 to 5 years, usually until the first mortgage is due as then he has no payout penalty.

QUOTE (peihouserental @ Jun 14 2010, 07:32 AM) 2. Do lawyers draw up the papers to switch title to us and set the bank as the 1st lien holder.
Bank is already on title. Thus you can do the title transfer yourself, BUT it is not recommended. yes, use a lawyer !

QUOTE (peihouserental @ Jun 14 2010, 07:32 AM) 3. If I purchased this, would I pay the bank the 693 or would I pay the vendor. Just wondering who makes sure the mortgage is getting paid properly.

If you assume mortgage you pay bank. If vendor carries [via Agreement For Sale], you pay him, and he pays bank !

Ensure you know what to do if he stops paying bank !!

 

[DaveL]

QUOTE (ThomasBeyer @ Jun 14 2010, 10:04 AM) Vendor carries assumes an Agreement for Sale. This means you will NOT go on title as owner, just as a caveat holder. Otherwise it would be called an assumable mortgage. maybe this is what the seller means. Find out. Thus, first find out if seller stays on title or if you go on title as the new owner !

Re mortgage length: you do what is agreed on. Most sellers do not carry for 25 or even 35 years, but for 1 to 5 years, usually until the first mortgage is due as then he has no payout penalty.


Bank is already on title. Thus you can do the title transfer yourself, BUT it is not recommended. yes, use a lawyer !



If you assume mortgage you pay bank. If vendor carries [via Agreement For Sale], you pay him, and he pays bank !

Ensure you know what to do if he stops paying bank !!

What can you do if he stops paying the bank? Now I am curious

 

[Thomas Beyer]

QUOTE (DaveL @ Jun 14 2010, 12:28 PM) What can you do if he stops paying the bank? Now I am curious

you have the agreement for sale contract registered via a caveat on title (like a 2nd mortgage) .. you now talk to bank .. but bank has the right to foreclose as you are not (yet) the owner !

Bank would usually ask you first what you want to do .. and you now will likely re-finance the property as you are first in line behind the bank !

The problem is that often the vendor is behind many months in payments .. thus you need a cash reserve of perhaps 3-6 months mortgage payment.

 

[invst4profit]

On a separate note you may want to reconsider this deal as after P.I.T. plus expenses you will likely have negative cash flow.