Math Formula : Purchase Money Mortgage (PMM)

Question 1

Payments are made to the seller financing rather than lending institution. A portion of the buyers down payment when the buyer assumes an existing mortgage.

Example: The purchase price of a home is $200,000. The buyer is assuming the sellers FHA mortgage loan with an unpaid balance of $120,000.

Answer 1

$200,000 purchase price - $120,000 unpaid balance = $80,000 cash due at closing. The buyer asks the seller to accept 30,000 cash at closing and the remaining amount due to be paid to the seller over 5 years. Buyer is asking to take the purchase money mortgage at the specified interest rate and loan term in lieu of $50,000 cash at closing.