How to Fund a Mortgage

If you're in a position to help someone out by providing funds for their mortgage, then good for you--you're certainly in a better place than most people. But before your beneficiary closes, there are precautions you ought to take to be safe. Follow these steps when you're lending money for a mortgage.

Difficulty: Moderately Easy

Instructions

1. Hire a real estate attorney to draw up the paperwork. The documents should include the interest rate, terms and conditions (e.g., late fees, payment due dates, any points charged for the mortgage), payment amortization schedule and a mortgage note. Have your attorney contact the seller's attorney so that he can review the title, survey and appraisal.

2. Insist that your name appear on the buyer's homeowner's insurance policy under the "Mortgagee Clause," and that the buyers buy enough insurance to cover at least the amount of the mortgage. This will protect your money if the property is lost in a disaster.

3. Have the attorneys schedule a closing at a title company or their office. Have your money ready to be withdrawn in your account. Make sure your attorney understands that you want to be recorded as the primary lien holder on the buyer's title policy.

4. Contact the title company where the closing is to take place, and ask for their wire instructions. Wire the money from your bank account to theirs so that it appears at least an hour before the closing. The closer will disburse the funds by check to the seller, the seller's mortgage company, the attorneys and any other third party that was to be paid at closing.

[dottier2]

on 6/20/2008 We sold our vacation home under a owner financing contract with a balloon payment at the end of three years. The new owners now want to pay-off the balance(18 mnths into the contract) and I am having trouble figuring out the pay-off amount as they were constantly late on thier payments. How do I calculate the addition interest on the late payments? IE: Jan 1 payment would have been applied as 105.62 to principal and 365.23 to interest if paid Jan 1, but it was not paid until Feb 16th along with the Feb 1st payment. Do I just calculate the daily interest rate on the balance of the loan and add that to the 365.23 for the 45 days?