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 New Mortgage

New Mortgage Creative Real Estate Financing Technique #1

A new mortgage works well when the seller owes nothing on the property or when the amount the seller owes is not greater that 40% of the value of the property; however, you must have a flexible seller who is willing to help finance the property.

For example, assume the seller of a $50,000 house has an existing loan of $12,000, is looking for a $15,000 down payment, and is willing to carry the financing for the balance of $23,000 ($50,000 less $12,000 less $15,000). Simply obtain a new first mortgage for $27,000, which can pay off the existing $12,000 mortgage and give the seller $15,000. Next, give the seller a second mortgage in the amount of $23,000. The $27,000 first mortgage plus a $23,000 second mortgage gives the seller his of her total asking price of $50,000.

A seller who may be initially reluctant to accept this offer may ultimately agree to accept an offer with more cash up front. For example, obtain a new home loan in the amount of $35,000, giving the seller an $8,000 larger down payment than expected, or a total of $23,000 ($35,000 new mortgage proceeds minus $12,000 old mortgage pay-off).

Some sellers have been known to join the buyer in signing a note and mortgage at the bank. If the buyer does not have sufficient credit to get a new mortgage, the seller, in effect, loans his or her credit to the buyer.

Example Summary Technique #1

New Mortgage
Pay Off Existing Loans & Provide Down Payment Money


What You Need To Begin:

Good Credit
Flexible seller to finance property


Summary Of Terms:

Asking price


Existing price


Required down payment


Loan extended by seller           




Obtain new first mortgage        


Pay off mortgage         


Give balance to seller


Obtain second mortgage from seller




  • The seller receives total asking price and entire down payment needed.
  • The buyer has a creative no money down deal.

Specific Situations to Apply Technique #1


The Property (has or is)

Property Offered Below Market

Low Mortgage, High Seller Equity

Extra Lot or Personal Property

Owned Free and Clear No Mortgages

Low Interest Assumable Mortgages

Existing 1st or 2nd Mortgage Private

Unused Room (s) that Could Be Rented


The Buyer (has)

Cash for only part or Down Payment

No Cash at All

Lump Sum Cash Due Soon

Poor Credit

You Know People With Cash to Invest


The Seller (has)

Outstanding Financial Obligations

Must Sell Immediately

Will Rent or Sell

Moving Out of Area

New Mortgage To Interest Rate