Financing in 76651>Question Details

Gdf1956, Home Seller in Italy, TX

Can I do owner financing on a house that I still have a mortgage on?

Asked by Gdf1956, Italy, TX Sat Jan 19, 2008

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Probably you can. This is something we do pretty often. Get an attorney and do a wrap around contract. In that contract you sell the property and "wrap around" the underlying loan with the sales document.

Lets say that youowe $300,000 on a home. The buyer agrees to pay you $400,000. In this case you could accept $50,000 down payment form the buyer (this could be any number) and the Buyer now owes you $350,000.

The contract is between you and the buyer...the bank is sandwiched in the middle. In this case lets say your payment with taxes is $2500 that you pay to the bank. You and the new buyer agree that they will pay $3000 per month.

You both agree to put the monthly payment into a neutral collection account like a title company or bank. The bank is instructed to pay the bank first, than the taxes, and than you get the balance paid to you.
Pretty simple.

You still have a legal obligation to pay the loan and you need to keep the home insured to prevent against loss in the event the buyer damages the home or there is a fire. The Loan could eb for 1 year, 5 years, or whatever you can live with.

There is a down side and that is that you probably have a "Call" provision and that is a clause in the loan you have that sells if you transfer the title or any interest in the land that they can call the note. They rarely do but they can.

To protect you on this regard you need to have a clause that states that if your loan gets called due....than you are calling the contract with the buyer due. This can be a 90-120 day process. There is nothing illlegal about this at all and it is method we used in the horrendous markets of the 1980's as Interest rates were 18-20% form banks and we used these contracts to make sales at 8-10%.

We got things done and moved quite a few homes. This is something that can really work.

I am not sure if you are in Italy and or the US but either way this advise is only an explanation and you need to be careful to get adives in your market only! But this will work!

Great question...let me know if I can help further.


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2 votes Thank Flag Link Sat Jan 19, 2008
You need to pose that question to experts with credentials in Italy.

In principal there is no reason you cannot finance a property you own as long as you are making the payments as agreed in your mortgage. However, I do not know Italian law. In particular, I would suggest discussing your long term goals and objectives and analyze how this will help you achieve your plans.
1 vote Thank Flag Link Sat Jan 19, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
I'm not sure what laws, if any, govern these transactions in Italy.

In California, however, you might be able to do such a transaction via a Contract for Sale, where title does not change hands until the property is unencumbered or paid off. This transaction is akin to a car encumbered with financing. The pink slip with no lienholder--or proof of full ownership--doesn't pass until the car it paid off.

These transactions become more common when traditional bank financing is difficult to obtain.
1 vote Thank Flag Link Sat Jan 19, 2008
Roberta Murp…, Real Estate Pro in Carlsbad, CA
If you have a mortgage you can not sell the home without paying it off. Some states allow a contract for deed but the best advice is to get a lawyer to let you know what the law is for your state
0 votes Thank Flag Link Sat Sep 21, 2013
You are suggetsing what they call a wrap around mortgage or contract for deed. The answer is maybe but it's loan specific. I know people who have done this in the past very successfully. Where the banks "catches" this is when you change insurance into the new buyers name.

If you do it. Have 1 monthly payment from the buyer and you pay the taxes and insurance on the place.
0 votes Thank Flag Link Sun Jan 20, 2008
I think most attorney's would advise you against this in Texas.
Technically you can, but from what I understand being a non-lawyer it opens you to a huge amount of liability.
0 votes Thank Flag Link Sat Jan 19, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
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