Did You Give Owner Financing When You Sold Your Home
Would you sooner have cash than keep that owner financing?
Learn the secrets of the note-buying business
Who will buy your Owner Financed Mortgage
Most of the people advertising to buy your seller financed mortgage note are note brokers.
A note broker is not going to invest their own money to buy your mortgage in the same way that a real estate broker is not going to use their cash to buy your house.
Note Brokers Compared to Real Estate Brokers and Mortgage Brokers
Note Brokers, just like Real Estate Brokers and Mortgage Brokers, earn a fee for bringing buyers and sellers together. BUT, unlike Real Estate Brokers and Mortgage Brokers the fee is not a fixed percentage.
How Note Brokers Get Paid
You send note brokers all the details of the note, a copy of the mortgage, the note and other documents too. They then will submit this information to private or institutional mortgage investors. They get the best offer and then they calculate how much to offer you. The DIFFERENCE between what your note is worth and what you will accept is how their fee is calculated. This is how they can afford to pay for that costly Internet and TV advertising.
Should you use a Note Broker..Yes!
But how do you make sure that you are getting the best price and not leaving too much on the table?
Hungry note buyers will compete when you advertise your mortgage with us.
Sell your mortgage for cash rather than receiving monthly payments.
Not Hiring A Real Estate Agent
Although real estate agents command a hefty commissionusually 5% to 6% of the sale price of your homeits probably not a great idea to try to sell your home on your own, especially if you havent done it before. It can be tempting, especially if youve seen all those for sale by owner signs on peoples front lawns or on the Internet. So does it pay to hire an agent?
A good agent generally has your best interests at heart. They will help you set a fair and competitive selling price for your home, increasing your odds of a quick sale. An agent can also help tone down the emotion of the process by interacting with potential buyers and eliminating tire kickers who only want to look at your property but have no intention of making an offer.
Your agent will also have more experience negotiating home sales, helping you get more money than you could on your own. If any problems crop up during the process, an experienced professional will be there to handle them for you. Finally, agents are familiar with all the paperwork and pitfalls involved in real estate transactions and can help make sure the process goes smoothly. This means there wont be any delays or unforeseen legal ramifications in the deal.
After reading all this, should you really hire an agent? Only you can decide.
Expecting The Asking Price
Any smart buyer will negotiate, and if you want to complete the sale, you may have to play ball. Most people want to list their homes at a price that will attract buyers while still leaving some breathing room for negotiationsthe opposite of the underpricing strategy described above. This may work, allowing the buyer to feel like they are getting good value while allowing you to get the amount of money you need from the sale.
Of course, whether you end up with more or less than your asking price will likely depend not just on your pricing strategy but also on whether youre in a buyers market or a sellers market and how well you have staged and modernized your home.
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How Does Selling A Property With A Mortgage Work
The basic principle goes something like this:
When you own a house with a mortgage, the bank or mortgage lender will hold the Certificate of Title with your state or territorys Land Titles Office. When you sell your property, youll need to contact your lender and complete a Discharge of Mortgage form to formally notify them that youre selling the property and ending the mortgage.
Because this is a legal process, its usually recommended that your solicitor or conveyancer is involved. Theyll likely have already helped you organise your propertys contract for sale.
Discharge of Mortgage forms can take two to four weeks to fully process, and you may need to pay a discharge fee to help cover the admin costs of registering the discharge with the land titles office. Additionally, if youre selling your house while youre still in the fixed period of a fixed rate home loan, you may need to pay break fees.
Speak To A Mortgage Broker
A mortgage brokercan help guide you to finding the right solution if youre planning on buying and selling a house at the same time. That may involve remortgaging or porting your mortgage. The latter involves transferring your existing mortgage to your new property.
However even if you can port your mortgage, you may be able to find a better deal with a new mortgage and lender. So its a good idea to speak to a mortgage broker. Just bear in mind that if you take out a new mortgage before your current one ends you may need to pay an early repayment charge.
Read Also: What’s An Average Mortgage Interest Rate
Selling Your Home With A Realtor
If you use a realtor, you pay a commission based on the homes sale price. Realtor commissions may be negotiable, but typically range from 2% to 6%, depending on your location.
A realtor can help you:
- choose the right time to sell
- list your home on an online site such as multiple listing service or Centris
- identify ways to increase the value of your home before you sell
- determine an appropriate sale price
- arrange showings and open houses
- complete the necessary paperwork
How Much Will I Make Selling My House
How much you will make depends on the sale price, agent commissions, closing costs, and the remaining mortgage balance. If working with a real estate agent, you should receive a sellers net sheet before you even list your property, which details what you can estimate to make. When you have accepted an offer and are in escrow, you will get a closing disclosure from your lender that details exactly how much you will receive after your loan closes.
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Mozo provides general product information. We don’t consider your personal objectives, financial situation or needs and we aren’t recommending any specific product to you. You should make your own decision after reading the PDS or offer documentation, or seeking independent advice.
While we pride ourselves on covering a wide range of products, we don’t cover every product in the market. If you decide to apply for a product through our website, you will be dealing directly with the provider of that product and not with Mozo.
Niko Iliakis is a finance journalist at Mozo specialising in home loans, property and interest rate movements. With an eye for facts and figures, Niko deep-dives into topics to help readers understand key info and make more informed financial decisions. He is ASIC RG146 certified for general advice.
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Get Your Estate Agent Involved
If youre not comfortable and dont have the time to get involved with nudging everyone along then heres where your estate agent can help if youre when you are buying and selling a house at the same time. They will want to get you swiftly from accepting an offer to exchange of contracts. According to the Property Ombudsman Code of Practice for estate agents, their obligations to you at this time include monitoring progress, assisting you where they can and reporting information deemed helpful to bringing the transaction to fruition. In most cases this role will be carried out well but if you dont hear anything from your agent when youre selling a house and buying another or indeed you hear too much and think they may be adding stress to the system then discuss the level of their involvement with them.
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Q: Can I Use The Proceeds Of My Sale For The Deposit On The Home Im Buying
Yes. You should exchange on the same day as your buyer exchanges, and therefore youll be able to use the deposit they pay you to pay your deposit on the property youre buying.
However, if your new house is more expensive than your current house its likely that the deposit required will be more than the deposit you receive. If this is the case, it may be that your solicitor can agree with your sellers solicitor that the smaller deposit will be enough. But if this isnt possible, youll need to find the extra cash. Its worth checking to see if youre financially able to do this before you start the process.
Can I Buy Another Property Before Selling My Current Property
Whether youre upsizing or downsizing, it may be possible to buy your next place before selling your current place. This could minimise the time youd have to spend putting your possessions into storage and finding temporary accommodation while organising your next property purchase.
There are a few methods you could consider:
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How To Buy A House
In todays competitive housing market, if youre looking to buy a new home but have a current home to sell, figuring out how to make it all work can feel overwhelming.
If you want or need to buy a house while you have a current home to sell, you have to think strategically. And you may end up having two mortgages, or no mortgages, for a period of time.
There are a few different ways to go about purchasing a home while selling your other home, but none are entirely smooth and free of stress. Also, the method you use isn’t always within your control, as other buyers and sellers are also involved in the process.
While the situation may be a little stressful, people do it all the time. Most likely, you too can make it work. First, take time to understand your options and then determine your next steps.
Determine Your Remaining Loan Balance
Your loan balance will give you an estimate of how much of the proceeds from your home sale will need to go towards paying off your mortgage and how much could end up in your pocket. This can help you set your listing price. If possible, youâll want an asking price high enough to cover the balance.
You can determine your balance by contacting your lender and requesting the payoff amount for the loan â this number is how much you will have to pay to satisfy the terms of your mortgage. Itâs different from your current balance as it includes the interest you are also responsible for paying, as well as any early payment penalties.
Use Orchardâs Home Sale Calculator to find out how much you could make from the sale of your home.
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Review Your Settlement Statement
One of the final steps of selling a home will be to review your settlement statement, which is an itemized list of fees and credits summarizing the finances of the entire transaction.
This is where youll be able to see:
- The sale price of the property
- Your exact mortgage payoff amount
- Additional closing costs being subtracted from the price
- Whos getting paid, including agents collecting commission, local governments owed taxes and recording fees, and final charges going to the lender
- Net proceeds
You wont personally have to worry about making sure your lender gets paid. As Helali explains: When the buyer of your home makes the purchase, the escrow company will receive all of the funds and theyll write a check directly to your lender.
Review our complete guide on how to read a settlement statement for further guidance on this step of the sale.
Work With A Top Agent
Especially if youre selling your home with a second mortgage, youll want to lean on a real estate agent who has a proven sales track record. Remember, if you sell your house with a second mortgage, your sale needs to cover both of your mortgages plus all your selling expenses to make a profit.
Top real estate agents know how to list your home at a price that maximizes your returns. In fact, one National Association of Realtors® study found that homeowners who tapped into a real estate agents help secured final home prices that were 26% higher than people who tried to sell a house on their own. Ultimately, that means you could end up with a higher sale price to help you cover the balances on your outstanding mortgages.
If you want to locate a top agent who is an expert at selling in your area, try out the HomeLight Agent Finder platform. Youll be matched with experienced agents who know how to sell homes in your location and can help maximize your home value when you sell.
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What Do I Do If My Lender Wont Let Me Port My Mortgage
If you cant keep your current deal, then you will have to source a new product, whether thats with your current lender or a different one.
- The best thing to do is speak to an independent mortgage broker or financial adviser who can access every product in the mortgage market, allowing you to find the very best deal for your personal circumstances.
- If you feel your lender is being unfair with their affordability checks, you can challenge their decision.
- In the first instance, put your complaint in writing directly to the lender.
- If they dont resolve things to your satisfaction within eight weeks, you can contact the Financial Services Ombudsman free of charge.
HSBC, Barclays, NatWest, the Co-op Bank and Britannia Building Society have all been challenged about specific cases where they refused to let existing customers port their mortgages because they had applied the new, tougher affordability checks, against the FCAs rules.
All the lenders except Barclays agreed to reverse their decisions .
Cost Of Porting To A Cheaper House
|EQUITY LUMP SUM||£50,000|
|Table notes: All figures are simplified for illustration purposes and do not include fees and other costs associated with buying and selling.|
Table notes: All figures are simplified for illustration purposes and do not include fees and other costs associated with buying and selling.
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You Must Start By Seeking A No Objection Certificate From Your Lender On The Selling Agreement
Many have struggled financially to survive these past 15 months of pandemic, as many sectors faced job losses and pay cuts. As a result many people find it difficult to repay their loans, especially for an emotional investment such as a house that was bought for personal use.
In some instances, there are also people who have been repaying loans for their second house, thus suggesting heavy indebtedness. With inflation at a high and uncertainty looming large over regular, stable incomes, it does make sense to get rid of any added outstanding loans in ones investment portfolio.
If you bought an extra house that has an outstanding loan on it, you may want to sell the property to get rid of the debt.
Before you proceed to sell your property that has an outstanding loan on it, you must seek a No Objection Certificate from the lender on the selling agreement. Your lending bank must be notified of your intent to sell the property or the initiation of the process. The bank will intimate you about the balance loan that still needs to be repaid, thus providing the necessary evidence regarding ownership of the property submitted as collateral to get the loan. Here are more details about the process.
When both the buyer and the seller choose the same lender
What if both the buyer and the seller have different lenders?
What if the buyer pays from his savings?
Selling A House For Less Than The Value Of The Mortgage
When you sell your house at below the value of your outstanding mortgage, this is known as negative equity. Its a risk when house prices are dropping if you bought a house at the top of the cycle and are in a position where you are required to sell it at less than the value, youll still need to make repayments at the same rate.
To avoid this scenario, do your property research and make sure that any loans have a lower loan-to-value ratio of 90% to reduce the risk of not being able to repay the mortgage and being forced to sell at less than the mortgage value.
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