Important Owner Financing Strategies A Home Seller Needs To Understand

When selling your home with owner financing, there are some owner financing strategiesyou must understand in order to assess which strategy you can use or not.
 
Before we continue, let’s understand what is a mortgage. A mortgage is basically a piece of paper with the borrower’s pledges to pay an underlying debt using the subject property as collateral. Here buyer (borrower) is the mortgagor and the lender is the mortgagee.
 
If you as a seller do the financing, then you are the mortgagee. The morgagee places a lien against the subject property as collateral for the debt or loan. If buyer defaults on mortgage payment, the creditor (you, or the bank) may foreclose on the property.
 
A given property can serve as collateral for more than one loan. Therefore, it is possible to have more than one mortgage on a property. In this case, the mortgages become first, second, third, and so on, based on their order of filing in county’s public record. The second and third are junior mortgages and the subordinators to the first.
 
First mortgage has the first right to the property in the event of a loan default. Junior mortgages can only get paid after the tax lien and first mortgage is satisfied.
 
With the understanding the definition of the mortgage, let’s go on to the some owner financing strategies you must understand if you are going to offer an owner financing home for sale.
 
1.       Seller Carry-Back. The seller loans the money to help homebuyer in the purchase of the subject property. The loan is secured by a mortgage on the property being purchased. The seller places a lien on the property. This mortgage is called seller carry back or purchase money mortgage. A seller carry-back mortgage can be at any position among the liens on the property, that is, first, second, and so on. You can read more details on the example I am giving at http://besthomesellingtips.com/category/home_selling_by_owner_financing/.
 
2.       Wraparound Mortgage. Wraparound mortgage is a variation of a seller second mortgage wherein the seller remains obligated to pay the underlying first mortgage. Seller continues to make payments on the first mortgage loan and buyer makes payments to seller on a new mortgage loan that is subordinated to, and wraps around, the first mortgage. You can read more details on the example I am giving at http://besthomesellingtips.com/category/home_selling_by_owner_financing/.
 
3.       Blanket Mortgage. In addition to the property being purchased, the buyer pledges a mortgage on another real estate or personal property as a collateral to provide additional security. Blanket mortgage is secured by more than one property as collateral. You can read more details on the example I am giving at http://besthomesellingtips.com/category/home_selling_by_owner_financing/.
 
4.       Land Contract. Buyer agrees to purchase a piece of real estate property in installments. The buyer receives an equitable interest in the property. Only upon the completion of the required payments, buyer can receive the deed of the property. In the other words, the seller holds the deed all the time until the buyer completes all the required payments in land contract agreement.
 
Now you understand the terms of those important owner financing strategies. I will give you detail information on how to use owner financing by example in my forthcoming blogs.

Links For Related Artilces:http://besthomesellingtips.com/2007/07/29/how-to-protect-you-from-buyer-default-when-selling-your-home-with-owner-financing/

http://besthomesellingtips.com/2007/07/29/top-10-mistakes-made-when-selling-your-home-with-owner-financing/

http://besthomesellingtips.com/2007/07/28/how-to-do-owner-financing-and-the-eleven-rules-you-must-not-break-to-protect-you-from-buyer-default/

http://besthomesellingtips.com/2007/07/16/how-to-sucessfully-sell-your-home-by-owner-financing-part-1/