Buydown
Mortgages can be written with a buydown as part of the financing. This involves the seller helping the buyer to lower the interest rates for a period of years, or even the whole loan.
To do this, the seller puts money into escrow to make payments alongside the buyer, and lower the buyer's portion of payments. It can be done as a way to sweeten the deal on a hard-to-sell home, or in a slow real estate market. This method lowers the buyer's monthly payment, which makes it easier for the buyer to qualify for the loan.
Say you're selling a fixer-upper, and the only interested party is this sweet young couple, long on dreams...but short on qualifying work history to get approved for the mortgage.
You as the seller can put money into escrow to make the payments more manageable for them, and entice the bank into making the loan. It might cost you to do this, but it might be preferable to being stuck with a house you can't sell.
Related or Semi-related Video
Finance: What is a second mortgage?4 Views
Finance allah shmoop What is a second mortgage Okay you
know what a first mortgages it's otherwise cleverly named what
is called it is called oh yeah Mortgage it's Just
a loan on a house You paid four hundred grand
for this baby Hundred grand down two hundred fifty grand
in a first mortgage And they're still fifty grand You
owe well where's that fifty large coming from the bank
wouldn't loan you any more on a first mortgage that
was costing you six percent a year Tio you know
to rent that money So you had to get a
second mortgage which should things go awry and you become
a statistic Well that's it's fully behind the first mortgage
in the priority stack of payback So in a bankruptcy
situation the first mortgage first what's called a first mortgage
get it fully paid along with any fees associated with
it and back interest accrued and any other things that
are associated with that first mortgage it stands in line
first in priority Then any cash leftover gets attributed to
that second mortgage So not surprisingly second mortgage money costs
a lot more to rent then first mortgage money because
the risk of non payment in a bad situation is
meaningful E higher especially when the borrowed does this for 00:01:25.136 --> [endTime] a living
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