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.

West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.
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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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