Video Summary

What is a wraparound mortgage?  Wraparound mortgage is usually associated with what you call creative financing wherein an owner finances the property.  When they finance the property they have an existing mortgage and they agree to accept a larger mortgage from the buyer.  The buyer pays a larger mortgage to the seller.  The seller then, in turn, continues to make their payment out of the first mortgage.  An example of this would be: let’s say a seller owes $50,000.00 on this property and he sells his property to a buyer for $100,000.00.  The buyer only has $20,000.00 to put down, but the seller agrees to hold an $80,000.00 mortgage and that would be a wraparound mortgage since they would be making the payments or collecting the payments on $80,000.00.  They in turn would be responsible – the seller would be responsible for paying the underlying first mortgage in that they would not satisfy their first mortgage.

There are problems that can be associated with this in that the buyer may be concerned that the seller may take his payments and not pay his first mortgage, so we have to use care in assuring the buyer that the seller pays their payments so that they don’t get foreclosed upon.  Also, almost with all institutional mortgages there’s what they call “due on sale clause” meaning that whenever the property is sold or transferred then the loan can become due with payable.  With as many defaults of mortgages these days, there’s usually not too many lenders that are hauling along due with payable, but it does get complicated when dealing with the insurance and how the loan – the taxes – come out in the new buyer’s name.

The wraparound mortgage is a little complicated.  It’s a way of doing creative financing.  There certainly needs to be some guidance from a good real estate lawyer if you’re going to consider either taking back any wraparound mortgage, or if you’re a buyer and you want to give the seller a mortgage and they’re not going to pay off their underlying first mortgage.

So if you have any questions about a wraparound mortgage, give me a call at (727) 847-2288.

Video Summary

What is P.I.T.I.?  That’s a term that is used when getting a mortgage through an institutional lender.  It stands for Principal, Interest, Taxes, and Insurance, and relates to what your monthly mortgage payment will include, which will be a portion of the principal, the interest, a portion of the taxes, and a portion of the insurance.  How they calculate that is, of course, amortized which means they spread out your payments over a certain period of years in order to come up with that dollar amount.  They divide the amount of your insurance by 12 and come up with a monthly amount, and do the same thing with your taxes to come up with your monthly payments in order to come up to your total monthly payments which will include PITI – which is Principal, Interest, Taxes, and Insurance.

If you have any questions about your mortgage, give me a call at (727) 847-2288.

Video Summary

What’s a purchase money mortgage?  A purchase money mortgage is usually associated with what they call seller financing – that’s whenever a seller is going to finance the property for the buyer.  An example would be if they sold the property for $100,000.00 and they took $20,000.00 down and took back an $80,000.00 mortgage so that the buyer would pay directly to the seller the $80,000.00 promissory note mortgage.  Well, that would be a purchase money mortgage.  A purchase money mortgage could also be considered by a lender who furnishes the money for the purchase of the property, and therein lies the name “purchase money” in that the money that is used from the lender is used to purchase the property.

What is the significance of a purchase money mortgage versus a different type of mortgage that you could have as far as acquiring the property?  Well, that has a higher priority so that if there were any other liens and placements – say a judgment lien against the purchaser of the property – a purchase money mortgage, even though it’s reported after the judgment is against the purchaser of the property, would still take priority in the event that you would ever have to enforce the mortgage through a foreclosure action.  So purchase money mortgage is received by a lender in the form of a mortgage whenever they supply the money for the purchase of property, and therein lies the name “purchase money mortgage.”

If you are looking to sell your property and would like to have a note and mortgage prepared, let me know and give me a call at (727) 847-2288.  Thank you.