What Is Holding a Mortgage?

Holding a mortgage means that, instead of selling a house to a seller who has gotten a loan from the bank, you instead arrange to receive monthly payments from them directly until the house is paid off. There are a few different sides to holding a mortgage, and we will explore several of them here. First off, holding a mortgage appears as undesirable to many people because instead of receiving a large lump sum right away, they get monthly payments over time. But then again, if you get payments instead of a large sum, you also get to earn interest. This interest would be a better return than what you would get putting the money into a savings account, so for this reason, some people like the idea of holding a mortgage.

Holding a mortgage is definitely a risk. If the buyer falls behind on the payments, then you can always foreclose and resell the house. However, you run the risk then of the occupants trashing the house. If you need to make costly repairs, you will spend money on that. Also, remember that money value changes, so the money that you would make in one large lump sum might be better invested than money gained over time.

Most of what causes people to decide on holding a mortgage lies with the situation, and whether or not they need, or want, a large lump sum of money up front. It is also pretty common to see a relation hold a mortgage if selling property to a family member.


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Founder at LoanSafe.org
My name is Maurice "Moe" Bedard. I am the founder of America's #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications. I currently live in Carlsbad, California with my beautiful wife and children.
  • Sharon Gray

    I know you probably been asked this a lot. I have put my house on the market. I have been asked to do a seller finance agreement or hold the mortgage on my house. The buyer is new to this area and works for a mortgage co. of all places. But can not get a loan until he has been here a year. I did a background check on him and he qualify for a loan of this size. I do not really know what to do. I still owe a little on my house, and need to know if it is in my best interest to even consider doing something like this.

  • http://www.loansafe.org Evan Bedard

    Hello Sharon,

    Is the buyer wanting you to accept a seller finance for the entire purchase price? Keep in mind that he doesn’t need to live in the area for a year before he can buy a home, that really makes no sense.. He just needs to have a stable job history the past two years, enough income and of course good credit history. If he’s unable to obtain financing on his own, there’s a reason why. I’m not sure where you’re located, but if it were myself I would keep the home on the market until your next offer.

  • Sharon Gray

    Evan Bedard,

    Thank you Evan Bedard for your reply.
    I live in the great state of Tennessee. The area in which I live in was not really hurt by the housing bust. The marketable price of our house has not changed much. Which is great for me. But the banks have changed the way they lend money. So The market is slower. I was told it should pick up in the spring.
    The buyer wanted me to set it up something like a rent to own. But just for the first year. Then they would finance it. The buyer said this would help him with his down payment of the 10% he needed. This offer did not feel right to me either. But I do not know much about it. My real estate agent made it sound like a good deal. She told me larger homes are harder to sell right now, and this is one way that works. So I am trying to do my homework on this.
    I would like to thank you for your input on this matter. Most of those whom I have spoken too about this, have no real insight on this. So I need all the information I can get.

  • Sharon Gray

    Hello Mr Bedard,

    I am trying to sell my first home and have already bought are second home. Would it be a good thing to refinance my first home to pay off my second? We do not owe hardly anything on our first home, So I was thinking of taking out my equity I have built up and paying off my second home. Is this a good idea or not? if I do refinance my first home, does it help to set it up as a assumable mortgage? Thank you.

  • http://www.loansafe.org Evan Bedard

    Hello Sharon,

    I apologize for not getting back to you sooner on this. I’m assuming you 1st home is the property you were considering a rent to buy option with the tenant? Please feel free to email me directly at evan@loansafe.org and I would be more than happy to help you set a game plan.