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Simple English definitions for legal terms
Purchase Money Mortgage
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A quick definition of Purchase Money Mortgage:
A purchase money mortgage is when someone buys a house and gives the seller a loan to help pay for it. This loan is usually in place of some of the money the buyer would have paid the seller in cash. For example, if someone buys a $500,000 house, they might get a $400,000 loan from a bank, pay $60,000 in cash, and give the seller a $40,000 loan. These loans have higher interest rates than regular bank loans and are often used by people who don't have enough money saved up or have bad credit.
A more thorough explanation:
A purchase money mortgage is a type of mortgage that a buyer gives to the seller of a property as part of the deal to buy the property. This mortgage usually replaces part or all of the cash that the buyer would otherwise pay the seller.
For example, if a buyer wants to buy a $500,000 house, they might pay for it with a $400,000 bank mortgage, $60,000 in cash, and a $40,000 purchase money mortgage.
Purchase money mortgages have higher interest rates than traditional bank mortgages. They are often used by buyers who don't have enough savings to cover a traditional down payment or who can't get a large enough bank mortgage due to poor credit.
Another example of a purchase money mortgage is when a buyer wants to buy a property that is worth $200,000, but they only have $150,000 in cash and can't get a bank mortgage for the remaining $50,000. In this case, the buyer could offer the seller a purchase money mortgage for the remaining $50,000.
These examples illustrate how a purchase money mortgage can be used to help a buyer purchase a property when they don't have enough cash or can't get a traditional bank mortgage.