What is a purchase money mortgage? The mortgage is recorded against the purchase price of a property and is known as purchase money mortgages. If a purchase money mortgage is not recorded properly, the purchase price can be considered a non-payment. If you fail to record your purchase money mortgage within a certain period of time, it may lose its super-priority status. In order to avoid this situation, it is best to record your mortgage before closing on the property.
Down payment mortgage recorded before a purchase money mortgage
Having your down payment mortgage recorded before your purchase money mortgage is important to preserve the super-priority status of your loan. A purchase money mortgage may lose its super priority status if it is not recorded on time or is recorded incorrectly. In the Indiana case, the lower court’s decision stood. The down payment mortgage holder knew that his mortgage had secondary priority and was not entitled to supersede it. However, he had not given notice to his assignee that his mortgage had a prior priority over the purchase money mortgage.
In order for your down payment mortgage to be recorded before your purchase money mortgage, it must be secured by a mechanic’s lien. Generally, a mechanic’s lien has priority over a purchase money mortgage if the mechanic has supplied materials. In addition, a Wisconsin construction lien has priority based on the date when visible work was performed on the property. In Illinois, a mortgage that was recorded before a down payment mortgage will take precedence if there was an underlying judgment against the mortgagor.
A case that highlights this conflict is the Greyhound case. A borrower executed a purchase money mortgage with a lender and later contracted with a construction company to repair the railroad. During the course of the repairs, the construction company recorded a notice of mechanic’s lien against the borrower. The construction company foreclosed on the mortgage. This case highlights a common issue in mortgage law: whether a down payment mortgage is recorded before a purchase money mortgage.
Advantages of a purchase money mortgage
There are many advantages of a purchasing money mortgage. The buyer has the ability to make a larger down payment and access the loan through a seller. This type of mortgage is also advantageous because the requirements are less stringent than those of a traditional lender. While the buyer must make a negotiated down payment, closing costs and interest rates are generally lower than with a traditional loan. Additionally, buyers can repay the loan sooner and obtain title to the property.
A purchase money mortgage is popular among home buyers for several reasons. First, it’s an option for those who have poor credit or a lack of job history. Since the seller doesn’t have a strict lending process like an institutional lender, it’s easier to get accepted with mediocre credit and a less-than-perfect job history. Second, buyers can negotiate down payments and make the down payment in installments. They can also choose which payment option is right for them. For instance, an interest-only loan might be more convenient than a balloon payment.
Another major advantage of a purchasing money mortgage is the ability to refinance the home later if necessary. While the buyer has the option to refinance the house later, refinancing is not guaranteed. However, the seller benefits financially by avoiding the bank. Buying a house with a purchase money mortgage also typically closes faster than a traditional loan, making the entire process easier and more affordable. It’s also possible to earn income through this type of mortgage.