What type of financing does a purchase-money mortgage typically involve?

A purchase-money mortgage involves seller financing for a portion of the price of the property. This financing arrangement occurs when the seller provides a loan to the buyer to help facilitate the purchase. In such cases, instead of requiring the buyer to seek traditional bank financing, the seller allows the buyer to make payments directly to them. This can be beneficial for both parties; for the seller, it makes the property potentially more attractive to buyers who may not qualify for full financing through banks, while the buyer gains access to financing that might not be otherwise available.

In typical scenarios with purchase-money mortgages, the terms are usually agreed upon by both parties, including the interest rate and repayment schedule, which may offer more flexibility compared to conventional lending. This method of financing shows how sellers can directly contribute to the completion of a transaction, thus facilitating the sale even in a tighter credit market.