Purchase Money Mortgages (PMM)

Definition of "Purchase Money Mortgages (PMM)"

Chris Delpazzo real estate agent
Chris Delpazzo, Real Estate Agent Roselli Realty, LLC

Type of seller financing. It is a mortgage loan from a seller instead of cash for the purchase of real estate. The term has a dual meaning in real estate financing. All mortgage loans for real estate purchases are designated purchase money mortgages by lenders, and thus all the different types of mortgages explained could be classified as purchase money mortgages.


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The second meaning of the term explains what happens when the buyer does not have the necessary cash and the seller agrees to take back a part of the selling price in the form of a purchase money mortgage. Such a mortgage is ordinarily subordinated to take a second-lien position since the primary lender will require a first lien position before making the loan. For the purchaser, this means less cash and possibly an interest rate on the PMM less than if those same dollars were borrowed from a primary lender. The seller can possibly induce a sale not otherwise possible by agreeing to take back a purchase money mortgage. The seller is protected in that a PMM places a lien on the property the same as any other second mortgage.

Comments for Purchase Money Mortgages (PMM)

Rhonda Rhonda said:

I am purchasing a short sale for $120,000. I am told by the listing realtor to put 8,000 as PMM. I don't understand .

Oct 30, 2020  16:52:13

Real Estate Agent

Hey Rhonda! I assume the real estate agent asks for a down payment of $8,000 to proceed with the mortgage. Reach out to the listing realtor and ask them to provide more clarity. Wish you the best of luck with the purchase!

Nov 05, 2020  12:51:24

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