When purchasing subject-to, how will the seller acquire another mortgage?

[Jordan Archer]

Hey BP,

So, if I buy a property sub2, how will the seller be able to finance another property when they are tied to a 30yr loan? Are they stuck until that loan is paid off?

Just trying to think of all questions a seller may have...

Thanks BP!

Jordan

[Jesse Waters]

I had a discussion with some folks on this topic a while back.  The general consensus is that the mortgage will still stay on the seller's credit so long as they own the property.  So, with out getting in the weeds on the subject.  The seller when applying for another loan would take a copy of the contract that you have with them & show the bank that they are now applying for another mortgage through.  Depending on the exact situation, they would count the payments they receive as income for the seller, much the same as when you go to purchase an additional rental property, most banks will count the expected rents towards your income.

The key is to make sure that the seller continues to pay their note so that you don't get in a bind if they stop.  I have heard of companines, that for a small fee will process all the payments.  Call it ABC Corp.  You send your payment to ABC, they write a check for the mortgage and send it to the bank then send the sellers the overage.

Hope I answered your question & didn't convolute things.  In this case, I would suggest doing it under a land contract type structure so that you don't trigger any due on sale clauses in the existing first mortgage.  I would guess that most sellers would want to be paid off in a period of 3-5 years, at which time you should have enough equity built up to easily get the property under a tradational mortgage with the deed in your name.