Q&A: What does holding the mortgage mean?
Posted by in MortgageQuestion by sittingpretty2: What does holding the mortgage mean?
I am interested in buying a house and the seller is willing to “hold the mortgage”. What exactly does that mean, and would I be the legal title holder/owner of the property?
Best answer:
Answer by the tax lady
Don’t know.
“Land Contracts” do not pass title, but other sales can.
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I believe the seller is saying that he/she is willing to provide what is called “seller financing.” Instead of going to a lender and getting a loan, you can give the seller a promissory note for the purchase price of the house (less the down payment) secured by a mortgage on the property. If this is what it means, you would be the owner of the property, but it would be subject to a mortgage in favor of the seller. You should clarify this with the seller, since the term is a bit vague and leaves much to the imagination.
Whether this is a good deal for you depends upon (1) the terms of the promissory note and mortgage that the seller is willing to take; and (2) your ability to obtain third-party financing from a mortgage lender. If you qualify for a prime loan from a third-party mortgage lender, it is likely that the terms will be better than you could get from the seller. However, if you have bad credit, seller financing may be the only kind of financing you can get.
It’s harder to get a mortgage today than it was a couple of years ago. That’s why some home sellers are stepping in and financing deals on their own.
The concept of owner financing isn’t new, though it wasn’t as popular when mortgage money was easier and cheaper to come by through traditional lenders. But in today’s tough real estate markets, being able to finance the sale of your home can give a seller an edge.
There are a lot of good buyers out there that can’t get loans. When you eliminate the hurdle of qualifying for a bank loan, you’ll double the amount of buyers interested.