mortgage to secure position

[steve55121]

anyone.

I was wondering when you do a performance mortgage if you have to pay deed tax on that? I'm on my states department of commerce and I see several mortgages but they all mention deed tax on the top of the form.

When I do a lease option I want to be able to secure my position with a mortgage so when my tenant buyer closes they can do so with the original ower.

-Steve

[Dan Auito]

Don't blame you for playing on more than one field Steve, but I'll post up the net response here for all to follow along with!

I don't know if you would have to pay a deed tax on a performance mortgage, ask your state taxing authority. The thing to understand on a performance mortgage is "this is a seller's obligation" just like any other expense on the seller's side of the HUD 1 (prorated taxes, closing costs-if part of the sales agreement, etc.) so if you're seller is taxed on any underlying mortgages or liens at the time of sale they will be taxed on a performance mortgage as well, but it is a seller's obligation not the buyer.

Mortgage to secure option posted by Randy (SD)

well.... there is not going to be a HUD1 form right away since I will be picking up on a lease option and then assigning my agreement back to the seller at closing.

Example.....

1. I get a house FMV of 220k

2. I purchase the house for 200k from the seller

3. I want to make sure the seller does not try to sell my house behind my back.

4. I place a mortgage on the property for the 25k

5. I'm going to be sell it for to my tenant buyer for 225 1 year later.

6. I will get paid at closing since my mortgage will show up on title. I will have the tenant buyer close with the original buyer.

Doing it this way there is no need for me to purchase the property and then resell it, Or worry about doing a double close.

My reply:

So... the process is still the same. You will not be paid until your tenant buyer closes with the original seller and your performance mortgage will show up as a "sellers expense". The only difference is after the seller signs your performance mortgage you record it, will there be deed tax? I do not know ask your taxing authority if a seller is taxed on underlying liens.