A unique situation - what would you do?

[Timothy Colman]

Hello all,

I have a unique situation that I am seeking advice for.  I will keep it short and to the point.

A close friend of mine desires to sell his town home to me for his current mortgage balance (90k).  The home was built in 08, is 3/2 about 2000 sf, and is in great condition.  An identical property a few houses down sold for 118k in 2015.  So, we are looking at roughly 25k in equity going in.

I am currently stationed in Japan and will be for another year and some change.  Therefore, the property will not be owner-occupied and eliminates government backed loans.  

It appears my only option is an investment loan with 20% down, which would be difficult for me to scrape together and then rent the property. A HML seems to be out of the question in that I will not be there within a year to refinance, etc.

What would you do? 

[Don Konipol]

Almost no mortgage loans are assumable.  This means that it is a violation of the mortgage a or deed of trust for an assumption to take place. However, it is not illegal; it just means that the lender can accelerate the loan should they become aware of the assumption.

Despite the above, many real estate investors do purchase property "subject to" the existing mortgage.  While this is still a violation, the purchaser is not assuming legal responsibility for the loan, he is however making the payments.  The system works best when there is trust between the seller and buyer.

Further note; a lender can not stop a sale from taking place, whether the lender is paid off or not. What they can do is accelerate the note after the sale takes place.  Most lenders seem to rather turn a blind eye as long as the payments continue in a timely manner.