Do you have a house to sell? Perhaps you’re thinking about selling, and maybe you’re thinking about seller financing. But if you have a mortgage on your house, you might be wondering, “Can I do owner financing in SC if I have a mortgage on the property?” We get this question a lot so we decided to answer that question here… Keep reading this blog post and we’ll answer that question and give you some strategies to move forward…
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
Owner financing in South Carolina, like in many other states, is possible even if you have a mortgage on the property. However, there are some important considerations and potential limitations to keep in mind:
- Due-on-Sale Clause: Most mortgages include a due-on-sale clause, which means that if you sell or transfer the property, the lender has the right to demand immediate repayment of the outstanding mortgage balance. This clause is designed to protect the lender’s interest in the property. When you engage in owner financing, you are essentially transferring an interest in the property to the buyer, which may trigger the due-on-sale clause.
- Assumption of Mortgage: Some mortgages allow for the assumption of the loan by the buyer. If your mortgage includes this provision and the buyer qualifies, they may be able to assume the existing mortgage and continue making payments on it. This can be a way to avoid triggering the due-on-sale clause.
- Lender Approval: It’s essential to contact your mortgage lender and discuss your intentions regarding owner financing. Some lenders may be willing to work with you and the buyer to modify the loan terms or approve the transfer. Others may be less flexible or may require the loan to be paid off in full.
- Wraparound Mortgage: In some cases, you may be able to structure owner financing as a wraparound mortgage, where the new buyer makes payments to you, and you continue to make payments on the existing mortgage. However, this can be complex and may also require lender approval.
- Legal Requirements: South Carolina, like other states, has legal requirements and regulations related to owner financing and real estate transactions. It’s advisable to consult with a real estate attorney who is knowledgeable about South Carolina’s laws to ensure that your owner financing arrangement complies with all legal requirements.
- Contractual Agreement: Regardless of the specific financing arrangement, it’s crucial to have a well-drafted and legally binding contract in place that outlines the terms of the owner financing, including the purchase price, interest rate, payment schedule, and any other relevant details.
Homeowners love it because it’s a great way to sell and a great way to find even more buyers – including those who might not be able to get traditional bank financing. Home buyers love it because it means more choices for them and they don’t have to necessarily impact their credit score to get a house.
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 SC if I have a mortgage on the property?”
The short answer is: that 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).
owner financing in South Carolina while you have a mortgage on the property is possible but may require careful consideration of your existing mortgage terms, lender approval, and compliance with state laws. It’s highly advisable to consult with a real estate attorney and possibly involve your mortgage lender in the process to ensure a smooth and legally compliant transaction.
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.