Purchase Money Mortgage

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Purchase Money Mortgage

A security device entered into when the seller of property, as opposed to a bank or financial institution, advances a sum of money or credit to the purchaser in return for holding the mortgage on the property.

The seller of the property, rather than a lending institution, is the mortgagee. These mortgages are given concurrently with the conveyance of the land or the transfer of the items sold.

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Arvest Bank's mortgage division has originated $1 billion in purchase-money mortgage loans in 2018.
Then there's the possibility of a purchase-money mortgage, a mortgage some sellers offer to buyers when financing the deal themselves.
Note: The IRS Office of Chief Counsel concluded in CCA 200940030 that interest on up to $1.1 million of purchase-money mortgage debt incurred to acquire, construct, or improve a personal residence can be classified as deductible qualified residence interest, even when the entire $1.1 million is from a single first mortgage.
However, as shown in Figure 1, for all purchase-money mortgage loans originated between 2001 and 2006, between 15 and 25 percent were terminated in the first year, about 50 percent in the first 2 years, and 80 percent in the first three years.
This is important as, based on a variety of housing industry forecasts, first-time homebuyers make up 40 percent to 50 percent of the purchase-money mortgage originations each year.

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