purchase money mortgage
Purchase money mortgage refers to a mortgage that a buyer of real property gives to the seller as part of the transaction used to purchase that property. Instead of receiving the entire purchase price in cash at closing, the seller finances a portion of the sale by accepting a mortgage from the buyer.
A purchase money mortgage is often used in combination with other forms of payment. For example, a buyer might finance part of the purchase price through a bank loan, pay part in cash, and give the seller a purchase money mortgage for the remaining balance. In this way, the purchase money mortgage substitutes for some or all of the cash the buyer would otherwise need to complete the purchase.
Purchase money mortgages can be attractive when a buyer lacks sufficient funds for a full cash payment or cannot obtain conventional financing for the entire purchase price. The terms of a purchase money mortgage, including interest rate and repayment schedule, are negotiated between the buyer and seller and may differ from those of traditional institutional mortgages.
[Last reviewed in February of 2026 by the Wex Definitions Team]
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