Question
If I am paying a mortgage, can I get away with a Lease Option?
Yes, I know that most banks are firm against it, and we think that our bank is. And I hear that the bank could demand the complete rest of the mortgage if they find out, and we wouldn't have that. Bad But 1) we only have people interested in a lease option, and our building has been sitting empty almost a year, even lowering the price. No, we are not going to lower it anymore. 2) two people have told me to do the lease option anyway and there's a good chance we won't get caught. So how do we do this to lower our risk of getting caught?? I badly want to get some income to pay our mortgage and a lease option not only gives us that, but might end up in the building being SOLD finally.
2 months ago - 5 answers
Best Answer
Chosen by Asker
As long as you have not transferred title, your lender should not have an issue with a lease-option. It is only when you actually sell the property and try to "wrap" your mortgage - receiving payments from your buyer, but not yet paying off the mortgage you hold - that your lender can call the loan fully payable.
Source(s)
Former mortgage broker
by dog ma
2 months ago
Asker's Rating: 
Other Answers
You shouldn't be getting advise on Yahoo Answers. You need to speak with a real estate attorney. He/she can look at your mortgage documents and give you advise on what your options are. Trying to do a lease option without proper legal advise could make your troubles worse.
by Angie- 2 months ago
Go ahead and do it, but not as a lease option, call it a rent with option to buy. Have them sign a 1 or 2 year rental agreement and pay a little extra each month to go in a trust account to apply to their down payment. Also offer a sweat equity option, so your tenant can work to fix things up and agree on an additional amount that you can discount for them at the end of two years, maybe 2,000 discount, this way they will keep the property in great shape in case they don't qualify later. Then you refund their trust or close on the house either way. Good luck to you!
by timefan- 2 months ago
The simple answer is YES, if done right. Go see a real estate attorney. Over the years, I have sold and purchased many houses with a bank loan on them, by use of a land sales contract. Unless your state has a law against it, it is completely legal and the bank may not like it, but they can not do anything about it. Any person or entity with an interest in a piece of property can sell their interest at any time. So if you have a mortgage on a house with your brother or anyone else, and want to buy him out, just pay him off, and get him to sign a deed over to you. When you receive the deed from the bank in your name and the brothers name, you file both deeds with the county recorders office. The courts has held that "due on sale" clauses mean when the deed passes into someone elses hands. Until you pay off the Land Sales Contract, the deed has not passed into your hands. The person who has the mortgage with the bank is still the person responsible for paying the mortgage and who the deed from the bank will go to when the mortgage is payed off. If done right, that deed will go to the escrow company that handles the mortgage payments for you, and then sent to you with the deed the seller signed off on at the time you entered into a Land Sales Contract. You have both deeds recorded and the land is in your name only after that. There is more to this, but I can't give an entire class on real estate law on the space YA allows.
by ranger_co_1_75- 2 months ago
If I was doing this from the standpoint of the buyer, I would want to make sure that it was done with cooperation of the lender, because I would not want to pay into a place for several years, only to have it jerked out from under me by foreclosure on the owner. All too often lately the owner keeps the payments and lets it foreclose. I don't know how open lenders are to that. But when I bought land on recorded land contract many years ago, I made payments directly to the bank that financed the owner buying property from estate sales. So the bank was sure to get their money from my payments before the seller got any. The main issue is that you do NOT transfer the deed without satisfying your mortgage (due on transfer clause). The other issue is whether your lender allows you to rent out property if you originally got the loan as owner occupied. As mentioned, it would be best to consult a real estate attorney, especially to make sure everything is done properly if you do go forward with it.
by efflandt- 2 months ago