Existing Financing
An offer to purchase will contain information about how the buyer intends to finance his or her purchase. If you currently have a mortgage loan on your home, you may be faced with one of three situations:
1. The buyer wants to pay cash and have no mortgage
This situation will require you to pay out your existing mortgage and there will probably be an interest penalty for doing this, unless you "port" the full amount to your new home (see your banks policy on porting) or have an open mortgage. Remember that having to pay an interest penalty effectively reduces the price you will be receiving for your home.
2. The buyer offers to assume, or take over, your remaining mortgage loan
In this situation, before agreeing to allow the buyer to assume your mortgage loan, you should ensure that your mortgage lender will release you from any future obligation to repay the monies owning (if the buyer defaults).
3. The buyer wants to take out a new mortgage loan
Contact your financial institution that holds your mortgage to obtain information in writing about your position in each of the above situations. It is a good idea to do this earlier, if time is permitting, so that you will be prepared.
Financing by the Seller
If you have no existing mortgage, an offer to pay all cash is ideal and, of course, would be your preference. But the buyer's offer might state that part of the purchase price is to be paid in cash and part is to be paid in payments over a specified period of time, at a specified interest rate. In effect, the buyer would be asking you to become the lender.
When you are considering an offer containing a request for "seller financing" (sometimes referred to as a take-back mortgage), think about whether or not you want the responsibility of collecting payments over an extended period of time. If you do feel comfortable with such an arrangement, be sure that you verify the buyer's source of income and credit history before making a decision. Ask us, your banker or accountant to fully explain the financial significance and the possible consequences of the terms offered.
Sellers Beware
Be wary of offers that require any of the following
No cash paid as a down payment An amount of cash being returned to the buyer Your equity participation A promissory note without a registered mortgage The seller (you) to secure a new loan before closing Terms to be included, but which are not written in the offer Concealing information from a lending institution
Accepted Offer
Terry Marion will make sure that all the conditions are met and legally removed from the contract, so you can rest assured that your sale will go through to completion.
Do you have any concerns? Give Terry a call! TerryMarion@telus.net
To Sell Your Home Call:
Terry Marion
Realtor
Royal LePage Showcase Plus
3137 St. John's Street, Port Moody, British Columbia
Canada V3B5R5
Email: terrymarion@telus.net Office Phone: (604) 461-2844
Toll Free: 1-800-567-4677 Cellular Phone: (604) 644-7237
Home Fax: (604) 945-3599
