Assume Mortgage + Note for Balance

[Seyi A.]

Hi,

I am in the process of crunching the numbers on a single family home in Chicago, and I trying to think through the ins-and-outs of the financing structure I have in mind.  The property has been on the market for a considerable period of time, and I understand why, but it is in exactly the location I want and I'm comfortable with taking on the work to address the issues it has.  

The seller currently has a mortgage that is assumable (subject to approval from the lender), but the terms are far from ideal and I suspect she has run into problems refinancing.  My proposal is to assume the mortgage and offer her a note for the balance (10yr interest-only, 30-year amortizing), and I would be looking to refi the original mortgage at some point in the not-too-distant future once I have fixed the issues with the property.

My questions are:

1. Will my future lender learn the terms of the seller-financed mortgage by my declaring it on the loan application, or do they have some independent way to learn of its existence and its terms?
2. How will my future lender consider take into consideration the seller-financed mortgage?  Will they ignore it, or treat it just like any other mortgage?  
3. Is the interest on the seller-provided mortgage tax-deductible?
4. Are there any adverse tax implications of with this strategy?
5. If instead of a seller-financed mortgage secured on the property, I instead negotiate an unsecured note, how would the answers to 1-4 above change?
6. Given that what I'm trying to do is to a)help the seller get out of her sticky situation without b)needing to bring much cash to the table, and c)save funds for what will be a substantial rehab that would probably disqualify me for a traditional construction loan, are there any better ways to structure my offer?

Apologies for the 20 questions, I'm still very new to this whole "creative financing" party.  Thanks in advance for you answers.