Seller seconds is an alternative way to get your buyer into that home ! When a Seller has enough equity and does not need the full amount at the time of the sale, this is an option many Realtors don't consider. There are many benefits to both the Seller and the Buyer, and the Realtor gets the " SOLD" sign .
When a Buyer qualifies for a less than 100% LTV, the Seller can do a Private Second mortgage. The mortgage is recorded on title. The Seller charges an interest rate and usually does an IO ( interest only ) loan. The Buyer pays the monthly interest rate, and the loan balloons in a min. 3 yr term. It is a Win, Win situation !
The usual interest rate is 8%, which is more than the banks pay the Seller if the money was just sitting in the bank drawing interest. The payment is lower than the Lenders charge, therefore allowing the Buyer to qualify with the debt ratio. The Lender requires the Buyer to qualify with both payments, and reviews the note and mortgage.
The subject property value increases each year , therefore allowing the Buyer to refinance and payoff the second mortgage within a few years. The Seller makes more money, the Buyer gets the home, the Realtor gets the Sale!
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