What is a Sellers second Mortgage?
Saturday, 31. July 2010
I am trying to sell my house. The sales price is 1500, the buyer was able to get a loan for 97% of the sales price. However they want me to do a Seller’s Second Mortgage for the remaining 4% (00). How exactly will that work? What do I base the terms on? How does the agent get paid?
The house had very little equity in it. How does my bank get paid? Is it a good idea to even consider in the first place. Thanks.
Christine Says:
It’s basically a 2nd mortgage in which you are the "bank" so to speak. It’s called a Seller Carry-back. You can charge interest and set specific payment terms and even foreclose if they don’t pay. A Deed of Trust is recorded on the property behind their first lender.
If you can afford to, and it seems like a solid "investment" then by all means, but if you need the 5k to use for other purposes, or to pay off your existing lender, then don’t.
In the end, it has a lot to do with your comfort level. If they can’t afford to put down $5k, could they afford to pay for both loans??
Good luck
Aaron V Says:
If the amount you receive from the buyers mortgage company is not enough to payoff your mortgage I would stay away from a seller’s 2nd. This practice is used when a buyer has no money down and this is the banks way of getting their equity in the house first. If the buyer didn’t pay and the house was foreclosed on you would be paid after his bank. The terms on these loans are up to you, he can pay you monthly or it could be due in 6months, your choice. I would suggest he find additional financing or help from family but if you don’t know the seller personally I wouldn’t due a seller’s second.
thetoothfairyiscreepy Says:
a seller’s second is a 2nd mortgage taken out by the buyer with the seller. basically, there is the first mortgage (with the lender) and then you would be the second mortgage (with you, the seller).
i wouldn’t do it, simply because the buyers COULD, quite possibly, NOT pay you the $5,000. however, if using a closing attorney, they can legally prepare this seller second and explain to you the ramifications of it. check with an attorney if you do not understand.
vetteman Says:
Its just where you would carry the loan for the 5000 as far as terms you could set it at 10% interest (or more), but with very little equity it might not be a good idea the bank would get paid from the 97% loan and depending on the loan balance the realtor would get his cut from that also, maybe he should try to get a personnel loan for the 5,000 instead then you don’t have to worry about it ….good luck