Posted on: 16th Mar, 2010 04:38 am
Any "experts" out there who can give me some advice on a property in Canada? I've been approached by a buyer interested in my property but he can only come up with about 2/3 of the $. He has asked if i would consider a carry back mortgage for him of about half a million dollars... Financially I'm in a position to be able to do this but I have some concerns. I would be in second position to his bank which concerns me a little and I am also wondering if I would have to declare the monthly payments from him as income. Note that the property is my primary residence so I would not pay capital gains if he bought it outright. Any comments, suggestions out there? Naturally if I do proceed with this scenario my Lawyer would be heavily involved.
hi kayell,
if you carry a second mortgage on the property on behalf of the borrower, you will have a junior lien on the property. the primary mortgage holder will have the first lien. this means the first mortgage lien will have to be satisfied first before the seller carry back second lien is paid off. i believe you will have to report the payments you will receive from the buyer as your income. but since you will carry the mortgage, you can claim deduction for the mortgage interest paid. this type of financing is a little complicated and you need to take advice from a real estate attorney before entering into any sort of contract or agreement with the buyer. you should also consult a tax advisor or an accountant to know about the tax implications of this type of transaction.
if you carry a second mortgage on the property on behalf of the borrower, you will have a junior lien on the property. the primary mortgage holder will have the first lien. this means the first mortgage lien will have to be satisfied first before the seller carry back second lien is paid off. i believe you will have to report the payments you will receive from the buyer as your income. but since you will carry the mortgage, you can claim deduction for the mortgage interest paid. this type of financing is a little complicated and you need to take advice from a real estate attorney before entering into any sort of contract or agreement with the buyer. you should also consult a tax advisor or an accountant to know about the tax implications of this type of transaction.