Board Topic: seller finance question
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seller finance question

Posted by: az Sep 3 2004, 03:58 PM
I am researching the posibility of offering seller financing to speed up the selling of my home. But I only have about $100k equity and a mortgage balance of $250k. I wonder how it works if the buyer has two loans, one from the bank and one from me. Does the bank and me share the lien/title on the property? What happens if the buyer defaults later? Thanks for your comments in advance.

Posted by: loanuniverse Sep 3 2004, 04:46 PM
az:


In this case your loan will be secured by a second mortgage on the house. Both of the lenders get to place a lien on the house, but do not get any ideas about any “equal sharing” in this situation.


Just like the name says, second mortgages are secondary to first mortgages.

If the borrower defaults on either loan the affected lender can initiate foreclosure. However, the lender with the first mortgage gets paid first and you will get paid only if there is any money left.

On a foreclosure situation, the lender with the second mortgage has to buy the first mortgage position in order to save the investment. This is the reason why even if you are financing a portion, that the borrower puts some of his/her money as down payment. Even if they can only come up with 5%, that is better than nothing. You need a cushion too.



Good luck


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