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If you’re thinking about selling your home, and you’re open to non-traditional methods, you’ve probably come across owner financing as one of those possibilities. But now you may be thinking, “can I still do it here in WA even though I have a mortgage on the property?” We definitely see this question a lot so figured it was best to address it in a blog post – read on…
You have options
Now that you’ve decided to sell, you actually have several options at your disposal. One, you go through an agent; two, you can list it yourself; and three, you can go directly to a buyer. You may also have become aware of a strategy called “owner financing” (also known as “seller financing”) that allows you to sell your home to a buyer and receive recurring monthly payments as the house gets paid off; here’s how it works:
The buyer makes a down payment- The buyer pays monthly payments directly to you
- When the agreed-upon price is paid, the title transfers to the buyer
Homeowners like you love it because it’s an effective way to find more buyers, like those who can’t secure a traditional loan, and receive some advantages in the meantime. The buyer loves this approach because they have more to choose from and their credit score never factors into the process.
The simplest path forward is if you own your house outright, in which case you can execute a seller financing agreement. But what about a house with a mortgage on it? You’re probably wondering now “Can I do owner financing in WA if I have a mortgage on the property?”
In this case, it is a bit more complicated. Let’s examine further.
Seller financing with a mortgage
There are certain states that allow for something called a “wraparound mortgage” whereby you maintain your mortgage with the bank while extending a loan with a higher interest rate to the buyer. Keep in mind this is NOT legal in all states and as always, there’s fine print for you to take into account.
Can I Do Owner Financing if I Have a Mortgage on the Property? – You’ve got options
Don’t lose heart though – if your state does not allow this approach, there are other courses of action:
One of these alternatives is called rent-to-own. It’s a bit similar to owner financing, since you still get recurring payments and you still hold title, but there are differences, like the fact that the buyer won’t be making a down payment, needs to get a traditional loan and is renting the home form you in the interim time frame.
If you happen to fall into that boat where you want to accept owner financing, but you still have the mortgage in place, call us and let us know about your situation. We’re experts in real estate and have other options at our disposal that you may not be aware of. We’ll walk you through it all and we cannot help you, we’ll point you towards someone who can.