Posted by Monique on March 04, 2001 at 16:57:04:
Kelly,
I’m not sure why your name appears as the author of the last post. It was actually from me.
Maybe I’m drinking too much coffee and MISTYPED my own name. How knows?!??
Monique
Wrap Around Real Estate Mortgages - Posted by Kelly King
Posted by Kelly King on March 04, 2001 at 08:55:00:
I own a rental home. My tenant has expressed a desire to buy the house but does not currently have the money for a down payment and closing costs. I really want to get out from under this property and am considering a wrap around mortgage.
I realize many mortgages have a “due on sale clause” and I am checking with my lender on that. Would a wrap around mortgage help? How exactly does it work, i.e., title change, liability issues if new owner defaults, tax deductions, interest deduction on the main mortgage?
Thank you for all replies!
Re: Wrap Around Real Estate Mortgages - Posted by Kelly
Posted by Kelly on March 04, 2001 at 16:52:56:
Kelly,
Chris is right that you don’t want to necessarily contact your lender about your intentions to sell your house with a wrap mortgage.
Typically in a wraparound mortgage, title passes to the Buyer. And the Buyer gets all the benefits of ownership – including interest deduction and property tax deduction. If your Buyer defaults on the wraparound mortgage to you, you would foreclose and get possession of your property back.
An alternative way to sell your house is to sell on a Land Contract (aka Contract for Deed, Agreement for Deed, Bond for Title depending on your state). Your Buyer gets equitable interest in the property and all the benefits of ownership. However, they do not get the title to the property until some point in the future that is clearly stated in your agreement – generally once they have paid you off in full. If your Buyer defaults, it is often easier to regain possession of the property when sold with a Land Contract than it is when sold with a Wrap.
Also, since the title does not change on a Land Contract, your lender is less likely to raise an issue with the DOSC. Most DOSCs state that the clause can be invoked if you sell the property or sell an interest in the property. However, your Buyer’s interest in the property via a Land Contract is typically not recorded, making the DOSC less of an issue.
Good luck in selling your house!
Monique
Re: Wrap Around Real Estate Mortgages - Posted by Chris Baker
Posted by Chris Baker on March 04, 2001 at 11:36:52:
I am a beginner so I do not know alot, however, it is my understanding that you don’t even want to talk to your lender about this. You need to go and transfer the title to a land trust at the court house. Any one you choose as the trustee and your self as the beneficiary. I am getting ready to do this with one of my houses in a differtnt state. I have not done it yet so I don’t know all the particulars, just the basice. Hope this helps.