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.