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An offer to purchase will contain information
about how the buyer intends to finance his or her purchase.
Existing Financing
If you currently have a mortgage loan
on your home, you may be faced with one of three situations:
- The buyer wants to pay cash and have no mortgage.
This situation will require you to pay
out your existing mortgage and there will probably be
an interest penalty for doing this unless you have an
open mortgage. Remember that having to pay an interest
penalty effectively reduces the price you will be receiving
for your home.
- The buyer offers to assume, or take over,
your remaining mortgage loan.
In this situation, before agreeing to
allow the buyer to assume your mortgage loan, you should
ensure that your mortgage lender will release you from
any future obligation to repay the monies owning (if
the buyer defaults).
- The buyer wants to take out a new mortgage loan.
Contact the financial institution that
holds your mortgage to obtain information in writing
about your position in each of the above situations.
It is a good idea to do this earlier, if time is permitting,
so that you will be prepared.
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If you have no existing mortgage, an offer
to pay all cash is ideal and, of course, would be your
preference.
But the buyer’s offer might state that
part of the purchase price is to be paid in cash and
part is to be paid in payments over a specified period
of time at a specified interest rate. In effect, the
buyer would be asking you to become the lender.
When you are considering an offer containing
a request for "seller financing" (sometimes
referred to as a take-back mortgage), think about
whether or not you want the responsibility of collecting
payments over an extended period of time. If you do
feel comfortable with such an arrangement, be sure that
you verify the buyer’s source of income and credit history
before making a decision. Ask us or your accountant
to fully explain the financial significance and the
possible consequences of the terms offered.
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Be wary of offers that require any of
the following:
- no cash paid as a down payment
- an amount of cash being returned to the buyer
- your equity participation
- a promissory note without a registered mortgage
- the seller (you) to secure a new loan before closing
- terms said to be included, but which are
not written in the offer
- concealing information from a lending institution
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The Properties in Victoria Professionals will
make sure that all the conditions on the contract are
legally removed from the contract. He or she will schedule
appointments etc.
Congratulations! This contract can now
proceed to completion.
Do you have any concerns? Contact Us!
Liz
Grambart Anders
Treiberg
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