What is a seller held second mortgage?


A seller-held second mortgage is in fact a mortgage held by the seller to attract buyers to the property at hand. For example, if a buyer has a flawed credit score and can take a subprime 80% LTV mortgage, make 10% down payment and closing costs, the seller may provide the remaining 10% by taking a second mortgage for the difference.

In general, buyers will have to sign a promissory and a mortgage note and start sending monthly payments to the seller, and/or make a balloon payment in 2 or three years.

Although there will be lenders offering 100% combined loan to value (CLTV) programs with a seller held second mortgage, there will be lenders who won't accept it. A seller held second mortgage has to be disclosed as the lender is interested in the debt to income ratio of the borrower to make sure mortgage monthly payments will be handled successfully.

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