Do you have a house you’re thinking about selling? Perhaps you’re thinking about selling it with owner financing because you’re a savvy investor and you know it can help you sell the house fast and for a fair price and with zero realtor commission. Not to mention the tax benefits! But, if you have a mortgage on your house, you might be wondering, “Can I actually sell with owner financing in TN if i have a mortgage on the property?” We get this question all the time so we wanted to cover it here for our readers… Keep reading this blog post and we’ll answer the question and give you some strategies to move forward with…
You have options for your property
Homeowners who are thinking about selling have several options to achieve this. They can list their home through an agent, list it themselves, or they can sell directly to a buyer like Southern Sky Home Buyers. And, many homeowners are discovering a simple strategy called “owner financing” or “seller financing” that allows them to sell their home directly to a buyer without all of the realtor commissions and then they collect regular payments that pay off the house:
- The buyer pays a down payment and the seller becomes the lender
- The buyer pays regular monthly payments
- When the agreed-upon price is paid, the loan is fulfilled and the sellers lien is removed from the title
Homeowners love seller financing it because it’s a great way to sell without realtor fees, defer capital gains tax*, and a great way to find a larger pool of 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 for their families.
If you own your house outright, you also can do a seller financing agreement. But what happens if you have an existing mortgage on the property? Maybe you’re wondering, “Can I do owner financing in TN 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 a “wraparound mortgage” in which you extend a mortgage to the new buyer (usually at a higher rate of interest) while still paying your own mortgage to the bank. However, this is not legal in all fifty states or in all situations, and there are additional clauses that you should be aware of. We recommend talking to your local real estate legal professionals on that subject.
Can I Sell With Owner Financing if I Have a Mortgage on the Property? – Sort Of
If you’re unable to sell with seller financing in your area because of a mortgage, you have other options…
An alternative that might work for you is called the rent-to-own strategy, which has some similarities (such as ongoing payment and you still owning the house and keeping title) 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 and your unique situation. 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 discover the possibilities and make an informed decision on ALL of the ways you can sell your Knoxville property, or we can connect you with the right folks for the job thanks to our large network of TN professionals
*This is not legal or tax advice, consult your attorney for more information