SURE it is possible….Many people in the industry today are under 30 and don’t even know what an assumable loan is. On the Truth In Lending statement (TIL) provided by the lender, there is a box that is checked as to whether the loan is assumable or not. Many ARMS are assumable, usually fixed rate loans aren’t. (There is also a TIL provided by the mortgage broker, but it often isn’t accurate)
The wrap around loan or All Inclusive Trust Deed (AITD) is a way to take over an existing borrower’s payments without refinancing or qualifying for a loan. It can be used when a loan is NOT assumable.
The loan stays in the current name. The deed that is done transfers ownership, but there may be a problem getting it recorded, because in the terms of the note the original borrower is restricted from conveying interest, with a “due on sale” clause.
That being said, as long as payments are being made, I’d be surprised if loans were actually called today.
The buyer is safer making payments directly to the lender, and not to the seller. The seller’s credit is at risk if the buyer doesn’t make the payments.
There are potential problems in having a deed that doesn’t get recorded. It is a way for people today to get into a home without a down payment. If considering this approach, I strongly suggest using a real estate attorney to protect yourself. It can also be accomplished with a lease option or other methods.
At some point you will want to refi and pay off the underlying loan, but if the payment is acceptable, it is probably a larger risk to the seller.
If the buyer chooses to stop making payments and walks, the seller is the one whose credit will suffer.
I don’t want to give tax advice, so check with a CPA about the W-9 status, but I think that it can be worked out for the AITD buyer to get the tax deduction for the interest paid too, as long as the seller isn’t taking it also.
