Example Seller Second With Reduced Down Payment

Victor is purchasing a $200,000 property from John Q. Seller. However, he only has $20,000 for the down payment and the lender has approved Victor for a mortgage loan of only $130,000. Consequently, Victor is short $50,000.

Not one to give up too easily, Victor negotiates a seller second mortgage for the $50,000 shortfall. At the closing, the bank provides the $130,000 loan, which is recorded as the first mortgage. Victor then signs a second mortgage promissory note to the seller (John Q. Seller) for $50,000. Victor lastly provides the $20,000 down payment and completes the purchase.

The house is completely and legally in Victor's name. The title will show two legally recorded mortgage liens: the bank's $130,000 first mortgage and John Q. Seller's $50,000 second mortgage.

The seller grosses $150,000 ($130,000 + $20,000) from the sale, plus a legally binding promissory note for an additional $50,000. After a seasoning period, Victor can obtain a refinance mortgage loan of $180,000 to consolidate the two mortgage loans of $130,000 (bank 1st) and $50,000 (seller 2nd).

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Real Estate 101

Real Estate 101

This book makes it easy to not only buy a home, but figure out everything that you need to do, even get a loan. In simple and easy to understand language, it talks about where you should buy a home, what to look for in a home, how to find a home, how to get an agent, how to get a mortgage and more. This is a step by step process that you, a new home buyer, can use to purchase a home.

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