Residential Contract & Seller's Lease

[bkimmel]

My boyfriend recently closed on a house yesterday where the seller intends on staying in the house & therefore renting from my boyfriend until Aug. 31st. In the initial "One to Four Family Residential Contract, signed in March", the "Financing" section states that the buyer needs approval for all third party financing, etc. & that the contract is subject to "approval for buyer of a third party first mortagage loan having a loan-to-value not to exceed 80%...due in full in 30 years...interest not to exceed 8.5%" etc...

This contract was signed before my boyfriend got approval from his bank which was forwarded to the seller showing he wanted a "15 year mortgage".

In the "Seller's Lease", it states the seller (renter) should pay the buyer (my boyfriend/landlord) as rent the "BUYER'S MORTGAGE".

The seller is now saying he will not pay the 15 year mortgage b/c the "residential contract" stated approval of a 30 year mortgage.

Is this true? Does the mortgage HAVE to be for a term of 30 years b/c the initial "Residential Contract" stated the approval terms as such?

 

[Tracey]

Assuming the sales contract and the rental agreement are 2 separate contracts...

Your bf doesn't HAVE to get a 30 year mortgage. He can finance the house any way he likes. Likely, the 30/8.5/80 clause was put in to give bf a way out of purchase if he can't get financing on those terms or better.

Whether he can charge seller the full mortgage amount depends on whether the 2 contracts, when read together, indicate that seller was supposed to pay 'the mortgage' regardless of amount, or whether the seller's maximum rent was fixed as the monthly payment for a 30-yr, 8.5%, 80%-loan mortgage. If it's case 2, bf will have to make up the shortfall out of his own pocket. You can figure the max rent from amortization tables your library has in the reference section.

Over 4 months, you're probably talking less than $800. If bf really wants the money, he should sue in small claims court to have the judge interpret the contracts. Otherwise, just let it go.



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This is not legal advice and you are not my client. Double check everything with your own attorney and your state's laws.