I have a private mortgage for my house in the US. (Not seller-financed. My parents are the lender.) The lender gifts me the interest amount each month and only the interest is paid on the loan. So, the principal is not changing and I effectively pay $0 per month.
If I sell my house and buy a more expensive house, could I obtain a traditional mortgage for the difference in cost of the new house?
- Private mortgage loan amount is $400k
- I would receive $400k for the sale of the current house
- Terms of the private mortgage would stay the same for the new house
- Private mortgage terms would ensure no monthly payments over the life of the traditional mortgage
- Cost of new house is $600k
- I could qualify for a $200k mortgage (with 20% down if needed)
- Traditional lender will have primary lien
Thinking from the traditional lender's point of view this seems low risk. My debt to income ratio will be very low since I make no monthly payments on the private mortgage. Assuming the traditional lender can have the primary lien and they can verify by the private mortgage contract that no monthly payments will continue, I think they should view the $400k as essentially a down payment, but this is an unusual situation so I may be missing some things.