Land Contract Refinance Details

      Land contract refinancing refers to a method of selling land to individuals that generally cannot quality for a traditional mortgage (conforming or nonconforming). Essentially, a contract is entered into by a buyer and seller of a property requiring the buyer to make payments against the seller’s mortgage for a predetermined amount of time. At the end of that time it is expected that the buyer will be able to qualify for the mortgage and the buyer can be transferred full title to the land and the seller’s existing mortgage satisfied (the land contract refinance). Generally, this type of plan should be understood to violate the terms of most mortgage loans that become due in full upon the transfer of title to the property as the deed transferring title is not recorded as part of the transaction but rather is recorded at the time of the refinancing when the buyer is prepared to substitute the seller’s existing mortgage (on which they have been making payments) with their own mortgage. The seller is at relatively high risk in this type of situation as in the worst case scenario they could end up with mortgage loan that is called because of a sale of the property, but the buyer is unable to provide the cash to close the deal on those kinds of terms due to their inability to qualify for a mortgage. 

As with any residential mortgage loan....

Do not assume that the mortgage interest of this loan will be tax deductible. Consult a qualified tax advisor for potential tax benefits.