OWNER CARRY - Posted by Steve

Posted by Mike Daly on March 08, 2002 at 11:19:19:

I wouldn’t worry about it unless you have a specific reason to believe the bank would be watching out for this. It’s perfectly normal for people to move to different homes and rent out their old homes.


OWNER CARRY - Posted by Steve

Posted by Steve on March 07, 2002 at 20:07:48:

I have a few questions about owner carry:

I have agreed to carry the loan for a few months for an interested buyer. Purchase price is 135,000 which is what I need for a loan payoff.

  1. If I profit zero, I don’t have to pay taxes, correct?
    I have owned the home less than a year.

  2. How do we set up the contract so it doesn’t trigger the due on sale clause with the lender? Can we do something like keep the contract with a third party (attorney or title company) and not record it until the actual sale?

  3. Would I change my homeowners insurance to renters insurance even though technically he is not renting it?

  4. How are taxes affected? If he is paying $1000/month (which covers the mortgage payment), how do I show this as income but at the same time deduct the mortgage interest?
    Since he is buying and not renting, I do not want to be taxed on his monthly payment to me.

Hope that all makes sense
Thanks for your help

Re: OWNER CARRY - Posted by Mike Daly

Posted by Mike Daly on March 08, 2002 at 06:15:44:

What exactly do you mean by “owner carry”? Are you doing a wrap around mortgage, contract for deed, lease option, or something else?

  1. Right – no profit, no taxes.

  2. If you’re concerned about due on sale, you should sell with L/O, although you’re probably safe regardless.

  3. If you’re actually selling it then the buyer should pay for his own insurance, but ask for him to put you on the policy as “additionally insured” for your own protection. If he doesn’t get his own insurance, you will need to convert to renter’s insurance.

  4. It works out the same, the $1000 month is just considered interest income.


Re: OWNER CARRY - Posted by Jerry

Posted by Jerry on March 08, 2002 at 10:57:10:

Mike, do you find that in a wrap sale, that changing your underlying insurance to a landlord’s policy will alert the bank that you are no longer occupying the property? Ever had any trouble with this (assuming it was an owner-occupant loan to beging with)?