How do you sell a house when a family member is the lender and your mortgage is not paid off?
My husband and I are buying a house from my father. He will be the mortgage lender on a 30 year loan. We are happy with this arrangement, but what happens if we decide to sell the house before the 30 years is up?
Mail this post
Tags: buying a house, mortgage lender
December 6th, 2009 at 9:23 pm
The same thing that happens when you get a mortgage from the bank. You sell the home and the proceeds are used to pay off the unpaid mortgage.
Your father should record this mortgage with the county.
December 6th, 2009 at 9:23 pm
u have a land contract. YOU can sell the house whenever you wish
as long as his note terms to you are satisfied.
[which means your buyer would probably have to cash out your dad]
December 6th, 2009 at 9:23 pm
His payoff is made same as any commercial lender would be at closing.
First thing done at any real estate sale is all outstanding loans are paid and released. If he records the mortgage, he’ll be first in line to be paid. If you do a private note, then things get sticky. Up to you to make sure the note is satisfied at closing as it won’t be a legal lien on the property unless it’s recorded.
December 6th, 2009 at 9:23 pm
when you sell before the 30 years is up you use the proceeds to pay him the balance due. anything remaining is yours to keep.
this is no different than any other loan.
December 6th, 2009 at 9:23 pm
Is the deed in your name or your fathers? If it is in your name you are paying on a mortgage. If the deed is still in your fathers name you are buying on a land contract.
With either of these you can sell the house and pay off the balance due your father.
If you are paying a mortgage, your father may want all his money if you sell. He may also be willing to allow the new buyer to assume the mortgage, or take it subject to the mortgage. Subject to means, you are responsible if the new buyer doesn’t pay. Assume means you are off the hook.
If you are buying on a land contract (or long term lease /w option) the contract may or may not require you to occupy the property. If there is no requirement that you personally occupy the property, you may be able to assign your position to the buyer for a fee. Another factor to consider is that you father may get a tax benefit with this installment sale.