Purchase money mortgage

Definition

Purchase money mortgage in plain English

Normally when you buy a house, a bank hands over the money and you owe the bank. A purchase money mortgage is just a loan that is tied directly to buying that specific property — and here's the interesting twist: sometimes the SELLER acts as the bank. Instead of getting all the cash up front, the seller lets you pay part of the price over time, so you make monthly payments to them (this is called 'seller financing'). It's like buying a used car from a neighbor who says, 'Pay me $300 a month instead of getting a bank loan' — the neighbor is now your lender for that chunk of the price.

Related National Real Estate Exam terms

• Abstract of title
• Acceleration clause
• Accretion
• Accrued depreciation
• Adjustable-rate mortgage (ARM)
• Ad valorem tax
• Adverse possession
• Agency
• Alienation
• Amortization