Can I Do Owner Financing If I Have A Mortgage On The Property?

Do you want to sell your house? Perhaps you’re considering selling, and perhaps you are considering seller financing. However, if you have a mortgage on your home, you may be thinking, “Can I do owner financing if I have a mortgage on the property?” “Will my bank let me?” We get these questions frequently and will answer it here. Continue reading this article, and we’ll answer those questions and tell you the next steps.

You Have Options

Homeowners considering selling have various alternatives. They can list their home through an agent, list FSBO (For Sale By Owner), or they can sell directly to a buyer. Furthermore, many homeowners are discovering a simple approach known as “owner financing” or “seller financing” that allows them to sell their property to a buyer while collecting regular payments that pay off the mortgage:

  1. The buyer makes a down payment
  2. The buyer pays regular monthly payments
  3. When the agreed-upon price is paid, the title transfers to the buyer

Homeowners love seller financing because it gives them the perks of a rental without the headaches of tenants and toilets. It also allows more buyers to qualify for the property, and it can sometimes lead to a higher price than they could get if they list traditionally. Home buyers love seller financing because it is a simpler process, they don’t have to necessarily impact their credit score to get a house, and they can get more creative terms that create a win win situation for them and the seller.

If you own your house outright, seller financing agreements are simple and easy. But what happens if you have a mortgage? Maybe you’re wondering, “Can I do owner financing if I have a mortgage on the property?

The short answer, which is usually the case with real estate is: it depends.

Seller financing with a mortgage

Some states allow a creative financing product called a “wraparound mortgage,” where you give the buyer a mortgage (typically at a higher interest rate) while continuing to pay your original mortgage to the bank. This is not lawful in all states or situations, and there are other provisions to be aware of, and since this is meant to be educational, consult with a real estate attorney before attempting this.

Can I Do Owner Financing if I Have a Mortgage on the Property? – You have choices

If you are unable to sell with seller financing due to mortgage, you have a couple other options.

One attractive alternative is called rent-to-own, which has several similarities with seller financing (such as ongoing payment and you own the house) and some differences (there might not be a down-payment and the buyer would need to qualify for a mortgage from a bank at the end of the pre-established rental term). Either way, you still have flexibility with this method to create a win-win situation with the buyer.

Here is another alternative for you if you are considering accepting owner financing but your home is still financed by a mortgage: call or email us to discuss your property. We know about a variety of choices that you might not be aware of because we are real estate specialists with years of experience. We can guide you through those possibilities or provide a solution ourselves. If our solutions are not good for your situation, we usually can refer someone else who can help.

Get in touch with us today by clicking here to fill out the form or by calling us at (225) 288-7209.

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