What characterizes a purchase-money mortgage?

A purchase-money mortgage is characterized as a mortgage issued to the buyer by the seller as part of the transaction where the buyer is acquiring the property. This type of mortgage allows the seller to provide financing directly to the buyer, facilitating the purchase of the property. It is usually part of the seller’s offer to help the buyer succeed in making the purchase, often when the buyer may have difficulties securing financing through traditional lenders.

In contrast, refinancing an existing mortgage relates to altering the terms of a loan that has already been established rather than facilitating a new purchase. Mortgages for investment properties typically involve financing transactions that are separate from direct seller-to-buyer arrangements, focusing instead on investment strategies. Lastly, a loan that covers only closing costs is not a mortgage meant for the purchase of a property but rather refers to separate financial arrangements specifically for the costs incurred at the closing of a real estate transaction. Thus, the defining characteristic of a purchase-money mortgage lies in the direct financing arrangement between the seller and the buyer.