A common misconception is that you are not able to sell your house with owner financing if you still have a mortgage on the property. In reality it is still possible to sell your house with owner financing if you have a mortgage it is just easier to sell your house with owner financing if you don’t have a mortgage. Generally speaking you will need a good amount of equity in your property to sell your house with owner financing but not necessarily own the property mortgage free, Let’s take a look at what your options are if you would like to sell your house with owner financing but still have a mortgage in place.
You have options
Homeowners who are thinking about selling have several options. They can list their home through an agent, or they can list it themselves, or they can sell directly to a buyer. And, many homeowners are discovering a simple strategy called “owner financing” or “seller financing” that allows them to sell their home to a buyer and collect regular payments that pay off the house:
- The buyer pays a down payment
- The buyer pays regular monthly payments
- When the agreed-upon price is paid, the title reverts to the buyer
Although not many sellers are familiar with the owner financing option it has become more prevalent over the last several years as more sellers have discovered it. Several home sellers throughout the [market_city} that have discovered the owner financing option have decided it was a great choice for their particular situation. In many cases it makes it easier for the seller to find a buyer.
If you own your house outright, you can do a seller financing agreement. But what happens if you have a mortgage? Maybe you’re wondering, “Can I do owner financing in IL if I have a mortgage on the property?”
The short answer is: it’s complicated.
Seller financing with a mortgage
In some states, you can create something called a “wraparound mortgage” in which you extend a mortgage to a buyer (usually at a higher rate of interest) while still paying your own mortgage to the bank. However, this is not legal in all states and all situations, and there are additional clauses that you should be aware of.
Can I Do Owner Financing if I Have a Mortgage on the Property? – You have choices
If you’re unable to sell with seller financing because of a mortgage, you have other options…
An alternative that might work for you is called rent-to-own, which has some similarities (such as ongoing payment and you own the house) and some differences (there might not be a down-payment and the buyer needs to qualify for a mortgage from a bank at the end of the pre-established rental term).
If you are thinking about accepting owner financing but you still have a mortgage on your property, here’s another option for you: Get in touch with us and talk to us about your property. As experts in buying and selling real estate, we are aware of a number of options that you might not know about. We can walk you through those options and help you out ourselves or we can connect you with someone who can help you.