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| Question |
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How does a seller held 2nd mortgage work?
The seller of the house that I want to buy says that he will do a seller held 2nd mortgage. How does that work?
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| By
happygirl |
Posted on
09/30/06 Total Answers
3 |
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| Answers- |
| It's quite simple......let's say you buy a house for $100,000. the bank is willing to give you a good rate for a $75,000.00 mortgage loan. You have $10,000.00 to put down. That leaves a financing shortfall of $15,000.00.
The person selling the house says "I'll cover the shortfall with a second mortgage". That's called a Vendor Take Back (V.T.B.)
At closing, you have to give him $100 thousand. That would be made up of the 75 thousand from the bank, 10 thousand from your own resources and you will owe him 15 thousand which will be in the form of a mortgage,
Usually a VTB mortgage is completely open, runs for the same term as the first mortgage (the Bank Loan) and interest rate is a little higher than the bank because the seller is assuming a slightly higher risk. It's done all the time and as long as the payments fit your budget, it's one way to get the house you wanted.
Good luck with the new home....If you supply the pizza and the beer, I'll help you move. lol |
| Answer by :
Jack On Date
2006-10-01 00:08:06 |
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| Well, instead of giving the seller, say $50,000 in cash (in addition to the money from your lender that is secured by the first mortgage), you give the seller a promissory note for $50,0000 instead, which is secured by the second mortgage. Then, if you fail to pay on the first mortgage and the loan is foreclosed, the seller gets any equity left over after the first mortgage is paid, up to $50,000 plus interest. Clear? |
| Answer by :
Private U On Date
2006-10-03 08:14:38 |
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| Try the links in http://www.hot8sites.com/mortgage/ for all information on mortgages |
| Answer by :
gupta b On Date
2006-10-03 11:08:21 |
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