Video Summary

“What is a ‘piggy back’ mortgage?” A piggyback mortgage is one where you get a first mortgage, which is an 80-percent loan devalue on the property. The reason we use 80 percent is because you don’t have to pay mortgage insurance if you have an 80-percent loan devalue. Well, you say, “ I don’t have enough money. I want to borrow 90 percent or try to borrow 100 percent.” Depending on the length of the lending climate (Which is not too good right now; five or six years ago it was terrific.), you turn around and get a home-equity loan or a second mortgage for the additional ten to 20 percent of the loan, and that’s the piggy back portion. In this way, you avoid having to pay mortgage insurance on it.

It’s particularly helpful if you can do this if you’re in transition; what they used to call “bridge loans” (but you can’t find bridge loans anymore) where you’re going to acquire property and then later sell your other property and pay off your home-equity loan, or even pay down your first mortgage. So, the piggy back portion comes into play whenever you obtain a second mortgage at the same time as you get your first mortgage, and the purpose of it is to avoid having to pay mortgage insurance on a high loan devalue if you borrow more than 80 percent.

Back when the economy was red-hot we were doing any number of closings. We’d get an 80-percent loan and turn around and get a second mortgage or a piggy back loan for another 20 percent and provide 100 percent financing, or very close to 100 percent financing. So, if you have any questions about piggy back mortgages or a real-estate transaction, give me a call at 847-2288. Thank you.

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.

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 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

When do you need a title search in a real estate transaction? You usually need a title search anytime that you transfer the property or sell the property to a third party. They’re going to want to know whether or not there are any liens against the property. Many people say, “Well, I know there are no liens on it.” However, usually your word is insufficient, so they want a title search or title insurance to ensure that they have marketable title to the property and to insure them against any hidden liens or other problems that were in the chain of title prior to the present owner selling the property. Also, title searches are needed whenever you mortgage the property in that the new lender is going to want to have title insurance to ensure that there are no outstanding liens and who the owner of the property is.

Title searches are conducted in order to have title insurance issued. That’s something that the attorney or the title company reviews. They are now computerized. You can do what they call an ownership and encumbrance search fairly inexpensively if you just want to check to see if there has been any change in the ownership. However, you don’t have any assurances if it’s not accurate; if liens do come up you don’t have any insurance against it. Anytime that the property changes hands, it’s a good idea to get a title search just to make sure that the proper properties were signing the deeds and that there are no mortgages on the property or liens that either the seller or the buyer didn’t know about.

If you transfer in some property and want some title insurance or get a title search, give me a call at (727) 847-2288. Thank you.