Why Phnee should not be allowed to think about numbers
The Five Year Plan is looking a little shaky tonight. I did some very inexpert number crunching, and the numbers are depressing. For the kind of mortgage I'm looking for I'd have to come up with a down payment of at least $30K. $20K is doable (at the rate I'm going it'll happen in five years), but the extra $10K (or even $20K if I want to have some
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When my ex and I bought a duplex, we got a balance of sale (second mortgage) from the seller. A second mortgage from the seller is a very interesting "instrument". We wouldn't have had enough down payment for a conventional mortgage otherwise and would have had to pay the insurance and/or increased interest rate.
This only works if the seller can afford to have that money invested. They get a better interest rate than they could get at the bank and the buyer/borrower pays a lower interest rate than they could get at the bank. It is very secure for the lender. If the buyer/borrower doesn't make the monthly payments, the house ownership reverts to the previous owner for the mortgage. The buyer does not get back the down payment or any capital paid on the mortgage. This makes it attractive to the seller. It's good to talk to the bank before doing this. Our bank manager told us that the bank would give us a line of credit for the entire balance of sale when it came due in two years. That made that purchase possible for us. It worked out well.
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