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6/21/00, 10:06 pm

Legal Question

If a person still owes a mortgage on a home can he owner finance to another?

I am looking at a home and the person will owner finance, but he still owes a mortgage on the home. Can he legally sell it to me and what type of legal paperwork will be required?

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Re: If a person still owes a mortgage on a home can he owner finance to another? The answer is yes if the mortgage is si...

Answered By:

David Forrester

Re: If a person still owes a mortgage on a home can he owner finance to another?

The answer is yes if the mortgage is silent, i.e. does not have a prohibition on subsequent

refinancing/transfer, if the original mortgage obligation is preserve. However, you will find such a prohibition in almost every commercially prepared mortgage and any attempt to violate this clause will probably bring the original note due and payable and it is a short trip downhill after that.

Look very carefully at the fine print in the mortgage and perhaps you should consider asking the lender if you can assume the mortgage. If this is not possible, you may be able to enter into a lease with option to purchase clause, but again make sure this does not violate the original mortgage. Whatever you do, get it in writing and signed by the owner, as any interest in real property for more than a year is void if it is not in writing and duly signed (this is called the Statute of Frauds). Otherwise you may pay on this mortgage for decades and end up having nothing. You should have an attorney review the mortgage and prepared the mortgage/sales contact or the lease agreement.

If we can be of assistance, please contact us at Forrester & Associates, 256-435-1007.

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