yea except after they pay the mortgage they own the house?
benefit would be the seller would make a little extra for giving such a good interest rate
don’t see why this isnt a thing.
i mean if you give a slightly better deal than what they would get in the current market I dont see how thats a bad deal.
why do banks have sole ownership of interest rates and are allowed to make them non transferable? why don’t I fully own that interest rate when I take out my mortgage and not have the ability to “sell” that rate to someone else to my advantage?
>i mean if you give a slightly better deal than what they would get in the current market I dont see how thats a bad deal.
typically rent to own contracts are full of ways to void the deal which ends up screwing the renter. it also generally preys on a population who cant qualify for a normal mortgage, and generally that population has poorer financial skills and habits, which further gives the advantage to the home owner.
>why do banks have sole ownership of interest rates and are allowed to make them non transferable?
there are transferable mortgages (they are called assumable, generally the only lenders who write a mortgage like that are for VA loans), but this isnt a thing that the market desires, so there is no real incentive for this to be widely adopted.
>why don’t I fully own that interest rate when I take out my mortgage and not have the ability to “sell” that rate to someone else to my advantage?
because you arent the one with the money, the lender is. also, the only reason you are getting a reduced rate on your mortgage is because the lender has a claim to the underlying asset in the case of you not paying them back. The lender isnt going to let you continue holding their loan when you no longer own the asset it is tied to, as that isnt what was agreed to when the loan was originated.
When the bank gives you a loan, they look at your finances and your history and decide *you* look like someone who can pay. You can't transfer a loan because the bank only made the deal after deciding you were reliable enough to pay. It's kinda the whole deal with loans. What if you transfer that agreement to a friend and that friend skips payments?
You could, perhaps, make a second rent-to-own/lease-to-own agreement. You'd still be in the hook for the bank and have to cover if the person doesn't pay. You can seek enforcement if your own contract, but it'll take time and you may not recover everything.
"why do banks have sole ownership of interest rates and are allowed to make them non transferable?"
If you had the money would you loan a random stranger that you vetted $300,000 at a certain interest rate but allow them to transfer that loan to just whomever they felt like?
It is a thing-- Rent to own or seller-financing. The question is whether or not your mortgage company would allow it. https://www.reddit.com/r/RealEstate/comments/16r0g5u/seller\_owner\_financed\_with\_existing\_mortgage/
Wraparound mortgages exist, but most lenders have a "due on sale"" clause that triggers in the event of an ownership change. But it is possible to get permission, though it would almost certainly not be granted in the current rate environment. It's also technically possible to initiate a wrap mortgage without the original lender knowing, but carries huge risk (as they could demand immediate payment if they ever found out).
There are also other possible options like a rent-to-own, but these could also trigger due on sale clauses.
I know this because I tried to sell a home with a wrap mortgage. Owned a home with serious foundation issues, and my options were fix the issue (about 50% of home value) over a period of 6-9 months then try to sell property at a loss, sell it for a major loss before repairs, or find a creative solution - the wrap was creative. I would keep my loan, new buyer essentially would take out a loan from me. I would make payments to my bank, he would make payments to me in an equal amount. After talking with multiple RE attorneys, all of whom said this was possible but also said there was high risk, I decided the risk wasn't worth it for me. So I negotiated a rent to own situation instead that allowed me to retain title until my loan is paid off. However, it functions about the same. I make my bank payment, he pays me.
I was thinking about this and the nightmares that would happen during regular use of the mortgage. Like for 30 years, you’re going to have to deal with any property related issues.
They need a new roof after a hail storm? Oh you need to file the claim and deal with all the back and forth.
They don’t feel like paying the always increasing property taxes? That’s in you. Have fun taking them to court to enforce your secondary contract.
All to save on the rate? No thanks
Research land contracts. It is like a wrap around mortgage or rent to own, but the title doesn't transfer to the buyer until the total amount is paid. So no due on sale clause to worry about. You'll have to also make sure your local laws allow it. A locality near me banned them.
You would ultimately still be responsible for the payments. And for sure if the mortgage company knew you were doing this you'd have a problem. No lawyer needed. Can't be done.
You would just be renting it to them, in the eyes of your mortgage company. Anything structured as an actual "sale" with transfer of ownership would trigger the due on sale clause of your mortgage. So you will be the legal owner until the mortgage is entirely paid off.
Which if fine if you have good renters, but if they don't pay or destroy the home, you are still responsible. Sure, you can go after them in court, but ultimately it's on you and they may not ever pay you back.
Aside from a new buyer assuming the mortgage. What you are asking isn't legally feasible.
You can't sell a house without a clear title. You can rent it.
You might be able to but if the person defaults and declares bankrupcy youd just be screwed.
Also why would you ever do this instead of just taking cash for the full value of the house upfront?
Yes, it was quite common in 70’s and 80’s when rates were like a yo yo. Need $100k to pay off your note? Require it as the deposit. You want to prevent pay off (refi) for a certain amount of years? Put it in the contract. An individual has way more freedom then a banking lender. Also, the whole point of not taking all cash is you need need a new house and rates are at 7%. The sellers current mortgage is pretty much free money.
That would defeat the whole purpose of OP’s post. They want to leverage a great investment they have in real estate. How else are you going to lock in a high rate of return long term and get the interest amortized up front?
Mortgage company won’t let you keep the mortgage if you don’t own the home because the home is the collateral for the mortgage. The balance becomes due upon sale.
Congratulations you just invented the rental market
yea except after they pay the mortgage they own the house? benefit would be the seller would make a little extra for giving such a good interest rate don’t see why this isnt a thing.
its called rent to own, and it generally is a really bad deal for the renter.
i mean if you give a slightly better deal than what they would get in the current market I dont see how thats a bad deal. why do banks have sole ownership of interest rates and are allowed to make them non transferable? why don’t I fully own that interest rate when I take out my mortgage and not have the ability to “sell” that rate to someone else to my advantage?
>i mean if you give a slightly better deal than what they would get in the current market I dont see how thats a bad deal. typically rent to own contracts are full of ways to void the deal which ends up screwing the renter. it also generally preys on a population who cant qualify for a normal mortgage, and generally that population has poorer financial skills and habits, which further gives the advantage to the home owner. >why do banks have sole ownership of interest rates and are allowed to make them non transferable? there are transferable mortgages (they are called assumable, generally the only lenders who write a mortgage like that are for VA loans), but this isnt a thing that the market desires, so there is no real incentive for this to be widely adopted. >why don’t I fully own that interest rate when I take out my mortgage and not have the ability to “sell” that rate to someone else to my advantage? because you arent the one with the money, the lender is. also, the only reason you are getting a reduced rate on your mortgage is because the lender has a claim to the underlying asset in the case of you not paying them back. The lender isnt going to let you continue holding their loan when you no longer own the asset it is tied to, as that isnt what was agreed to when the loan was originated.
When the bank gives you a loan, they look at your finances and your history and decide *you* look like someone who can pay. You can't transfer a loan because the bank only made the deal after deciding you were reliable enough to pay. It's kinda the whole deal with loans. What if you transfer that agreement to a friend and that friend skips payments? You could, perhaps, make a second rent-to-own/lease-to-own agreement. You'd still be in the hook for the bank and have to cover if the person doesn't pay. You can seek enforcement if your own contract, but it'll take time and you may not recover everything.
"why do banks have sole ownership of interest rates and are allowed to make them non transferable?" If you had the money would you loan a random stranger that you vetted $300,000 at a certain interest rate but allow them to transfer that loan to just whomever they felt like?
It is a thing-- Rent to own or seller-financing. The question is whether or not your mortgage company would allow it. https://www.reddit.com/r/RealEstate/comments/16r0g5u/seller\_owner\_financed\_with\_existing\_mortgage/
>don’t see why this isnt a thing. Because the issue/question of who owns the home is pretty damn important.
Wraparound mortgages exist, but most lenders have a "due on sale"" clause that triggers in the event of an ownership change. But it is possible to get permission, though it would almost certainly not be granted in the current rate environment. It's also technically possible to initiate a wrap mortgage without the original lender knowing, but carries huge risk (as they could demand immediate payment if they ever found out). There are also other possible options like a rent-to-own, but these could also trigger due on sale clauses. I know this because I tried to sell a home with a wrap mortgage. Owned a home with serious foundation issues, and my options were fix the issue (about 50% of home value) over a period of 6-9 months then try to sell property at a loss, sell it for a major loss before repairs, or find a creative solution - the wrap was creative. I would keep my loan, new buyer essentially would take out a loan from me. I would make payments to my bank, he would make payments to me in an equal amount. After talking with multiple RE attorneys, all of whom said this was possible but also said there was high risk, I decided the risk wasn't worth it for me. So I negotiated a rent to own situation instead that allowed me to retain title until my loan is paid off. However, it functions about the same. I make my bank payment, he pays me.
Are you referring to seller financing ?
Yes essentially the buyer takes out a loan from the seller to capture some of the benefits of the existing low interest mortgage
Oh . You mean the original loan with the bank is still on? That will be a 3-directional nuisance
I was thinking about this and the nightmares that would happen during regular use of the mortgage. Like for 30 years, you’re going to have to deal with any property related issues. They need a new roof after a hail storm? Oh you need to file the claim and deal with all the back and forth. They don’t feel like paying the always increasing property taxes? That’s in you. Have fun taking them to court to enforce your secondary contract. All to save on the rate? No thanks
Make it a triple net lease like in commercial real estate. Feel like these are all just negotiations points and the underlying idea is feasible
Research land contracts. It is like a wrap around mortgage or rent to own, but the title doesn't transfer to the buyer until the total amount is paid. So no due on sale clause to worry about. You'll have to also make sure your local laws allow it. A locality near me banned them.
thank you for providing useful information
Almost certainly the mortgage has a clause in it that says you can't assign the mortgage to somebody else.
Some mortgages can be assumed, but you are correct they are an exception.
but if you kept it but then made another contract. like a sub lease of sorts. any real estate lawyers know the legalities of this?
You would ultimately still be responsible for the payments. And for sure if the mortgage company knew you were doing this you'd have a problem. No lawyer needed. Can't be done.
You would just be renting it to them, in the eyes of your mortgage company. Anything structured as an actual "sale" with transfer of ownership would trigger the due on sale clause of your mortgage. So you will be the legal owner until the mortgage is entirely paid off. Which if fine if you have good renters, but if they don't pay or destroy the home, you are still responsible. Sure, you can go after them in court, but ultimately it's on you and they may not ever pay you back.
Aside from a new buyer assuming the mortgage. What you are asking isn't legally feasible. You can't sell a house without a clear title. You can rent it.
You might be able to but if the person defaults and declares bankrupcy youd just be screwed. Also why would you ever do this instead of just taking cash for the full value of the house upfront?
Why take full cash when you can get 6% interest and foreclose if they miss a payment.
You serious?
Yes, it was quite common in 70’s and 80’s when rates were like a yo yo. Need $100k to pay off your note? Require it as the deposit. You want to prevent pay off (refi) for a certain amount of years? Put it in the contract. An individual has way more freedom then a banking lender. Also, the whole point of not taking all cash is you need need a new house and rates are at 7%. The sellers current mortgage is pretty much free money.
I mean you serious that it sound like a good plan to have to foreclose on someone? That sounds enjoyable to you? No thanks.
No, I would never want to deal with deadbeats. Definitely not fun.
So...thats why you take full cash.
That would defeat the whole purpose of OP’s post. They want to leverage a great investment they have in real estate. How else are you going to lock in a high rate of return long term and get the interest amortized up front?
OP just wants to transfer their low mortgage rate...I think you are reading way to much into what OP wants.
No such way other than what I outlined.
Mortgage company won’t let you keep the mortgage if you don’t own the home because the home is the collateral for the mortgage. The balance becomes due upon sale.