Full question:
Last year I used your 'Contract for Lease and Mandatory Purchase' to sell my home. The buyer is now unsure that he can qualify for a loan at the end of the agreement and wants to convert our agreement to some type of owner financing. I still have a First Mortgage on the home, which I cannot afford to pay off (without receiving my equity). Is there a way to do this owner financing with the existing mortgage? Will this trigger a 'loan call' from my mortgager? Sale Price: $319900 Current Mortgage: $165000
- Category: Real Property
- Subcategory: Sales
- Date:
- State: California
Answer:
A common way to implement seller financing is through a contract for deed, also known as a land contract. In this arrangement, the buyer makes payments but does not receive the deed until all payments are completed. During this time, ownership remains with the seller, and the property can be foreclosed if the mortgage is defaulted on.
However, if there is an existing mortgage, converting to owner financing may violate the due-on-sale clause in your mortgage. This clause allows the lender to demand full payment of the loan if the property is sold or transferred without their consent. Most mortgages include this clause, which means your lender could call the entire loan balance due if they find out about the transfer.
If the property is foreclosed, the buyer could lose any payments made, along with the home.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.