Purchase contract subject to existing mortgage

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Latest post Fri, Jun 22 2007 8:22 PM by LIMAMA. 8 replies.
  • Thu, Jun 21 2007 3:13 PM

    • dville
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    • Posts 32

    Purchase contract subject to existing mortgage

    I entered into a Real Estate Sales Contract that says that the purchase of the house is subject to existing financing via silent assumption. I believe that I am basically taking over payments for the owner but what I want to know is if this is legal. Are there any tax implications to doing this?
  • Thu, Jun 21 2007 3:20 PM In reply to

    re: Purchase contract subject to existing mortgage

    What do you mean you "believe" you'd be taking over the payments? You better be daggum sure. In any event, it sounds fishy. They'd be technically defaulting on their loan agreement/mortgage in a number of ways, and I'm not sure why they'd want to have their names attached to a loan for a property they no longer technically would own.

    Consult local real estate counsel.
  • Thu, Jun 21 2007 5:53 PM In reply to

    • LIMAMA
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    re: Purchase contract subject to existing mortgage

    Actually, its a good deal for you---you could default on the payments and their credit would get ruined since they would still be the owner of record.
  • Thu, Jun 21 2007 7:03 PM In reply to

    re: Purchase contract subject to existing mortgage

    The poster would still be minus a house when the bank foreclosed.
  • Thu, Jun 21 2007 7:35 PM In reply to

    • LIMAMA
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    re: Purchase contract subject to existing mortgage

    True, but a foreclosure would take months.
  • Thu, Jun 21 2007 8:40 PM In reply to

    re: Purchase contract subject to existing mortgage

    It's also known as a wraparound mortgage and is typically used when a buyer cannot qualify for his or her own mortgage.

    http://www.google.com/search?hl=en&q=wraparound+mortgage

    The main risk to the buyer is that the buyer can put a lot of money in the house and then lose it when the mortgage company finds out about the sale, calls in the loan, then forecloses when the buyer can't come up with the money and can't qualify for refinance.

    Or you may pay into the house for many years without incident and then, when you try to sell or refinance, you find out there was a glitch somewhere and you don't really own it.

    There may be other risks to the buyer. You would have to do your own research.

    Whose idea was this in the first place and why are you even considering it?

    • The right of the people 
    • to keep and bear arms,
    • shall not be infringed.
  • Fri, Jun 22 2007 8:25 AM In reply to

    • decider
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    Warning [=*#] re: Purchase contract subject to existing mortgage

    No, that is very likely NOT TRUE! And please don't assume that the deal you are being offered is in anyway beneficial to you.

    I STRONGLY urge you to have the contract reviewed by an attorney.

    There are ways to word the assumption so that you are no longer liable, but the most common way and the way preferred by investors is to keep you primarily liable for the mortgage.

    Primarily liable means exactly what you might think. Even though you no longer own the property the bank would look to you primarily or first for the payment. If the payment is late or is foreclosed, its marked against your credit. And the mortgage still counts against you credit should you want to buy something else.

    Don't assume because your bank is happy with the assumption that its a good deal either. Banks don't mind these kinds of assumptions because it essentially provides them added protection against default since there are now more people liable for payment.

    Please see an attorney as soon as possible!

    Good Luck!
  • Fri, Jun 22 2007 6:49 PM In reply to

    • dville
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    • Joined on Tue, Jul 18 2006
    • Posts 32

    re: Purchase contract subject to existing mortgage

    I am the buyer. I thought I was doing an owner finance deal but as I read the fine print it is really a "subject to". I may be stuck but I wanted to find out if this is even legal. I plan to refinance in about a year but right now I need to work on a couple things on my credit and get some more money to put down. I have a family so we needed to be in a house.
  • Fri, Jun 22 2007 8:22 PM In reply to

    • LIMAMA
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    re: Purchase contract subject to existing mortgage

    It may be legal, but you need to run it by a RE attorney.
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