Funding With Owner Finance

Lois' renters want to get owner financing to buy her house and cut out the middleman. Is this a good idea?

QUESTION: Lois bought a home in the country, and rented out their other home. Their renters want to buy the house with owner financing. She doesn’t know how to do that, and owes $79,000 on a $105,000 house. Can it be done? Dave has 2 choices for her.

ANSWER: Unless you have a very unusual mortgage, you cannot offer them owner financing. Owner financing is where they pay you a payment, and you’re not allowed to transfer the title of the house, because the normal mortgage has a due-on-sale clause, which means the mortgage company could call the entire loan on you if they knew that you had sold the house. That would be called a wraparound mortgage, and you don’t have the ability to offer that to them. You can either sell the house to somebody else or continue to rent to them.

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