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Assumable Mortgage:
If a buyer can assume your present mortgage
without having to qualify with a mortgage company, your home might sell
for a higher price than a similar house without an assumable mortgage.
This is especially true when the interest rate on your mortgage is lower
than present market rates. Check with your mortgage company to see if
your mortgage is assumable at an attractive rate.
Seller Financing: Choosing the 'home for sale by
owner' route does not rule out creative financing !
In some situations a good Buyer is
temporarily unable to get a big enough mortgage to purchase your home.
For example:
- The Buyer's funds are
tied up in an IRA or other long-term investment.
- A strong Buyer has
children in the last year of college.
Examples of mortgage loans a Seller
might offer to help a Buyer complete a purchase:
Balloon Mortgage Loan:
The buyer begins by making equal
monthly payments, but must pay the entire balance at the end of
a short period (usually between six months to three years).
This type of Seller financing gives the Buyer time to arrange a
regular mortgage loan through a bank and repay the Seller.
This type mortgage is usually implemented with a Balloon Note
of the type included in our
set of Real Estate Forms & Contracts.
Regular Mortgage:
Usually, this is a second mortgage
to cover the difference between the price of the home and what
the Buyer can finance. This differs from the balloon in that
the buyer makes equal, monthly payments until the mortgage is
paid off.
This type of mortgage is usually implemented with a Mortgage
Bond (included in our Forms & Contracts).
The form used to certify that each of
the above mortgages has been paid is called a Discharge of
Mortgage. A copy is included with our Forms & Contracts.
Forms and Contracts:
You can usually reduce your legal fees
by filling out forms and having a lawyer review them rather than
draft documents from scratch. Forms for balloon and regular real
estate mortgages are available at most large office supply stores
and in our
set of Real Estate Forms & Contracts.
Lease with option to buy:
Use when a home proves impossible to sell because prospective Buyers
can't qualify for a mortgage.
Your prospective Buyer rents the home
with an option to buy within six months to two years. If he
exercises the option, the Buyer/renter pays a lump-sum of 3%-5% of
the purchase price to the Seller. In addition to this down payment,
the Buyer/renter pays a monthly sum (usually $50-$300) in addition
to the regular rent. This monthly sum is credited to the purchase
price and is non-refundable.
Lease with option to buy" agreements are
available at OfficeMax, Office Depot, Staples and other large office
supply stores. They are also available in our
set of Real Estate Forms & Contracts. You can download
the Forms & Contracts to your computer or we can mail them to you.
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