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Private (Seller Held) Lending in Maryland

prepared by Arden Law Firm’s experienced & licensed attorney(s).  Our lawyers are licensed in Maryland only. 

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Private Party Loan Documentation
by Arden Law 

Arden Law Firm, LLC assists private parties with mortgage loan documentation in Maryland.

Generally speaking, most lenders must be licensed in this state, but there are situations where such loans are allowed.  Our law firm can help you figure out if the lender fits in a permissible exception to the general mortgage lender licensing laws. 

  • Single Family Homes, Townhomes and Condos (For sale by Owner)

  • Lots / Raw Land

  • Commercial Properties 

Private Mortgages Allowed under Maryland law:

A private party (individual, trust or LLC) can lend money backed by a secured note in MD in the following situations: 

  • Seller held Financing (“take back” loans) - where Seller is giving a mortgage to the Buyer
  • Immediate Family. (e.g., Parent or Grandparent loan, loans between brothers/sisters)
  • Commercial “hard money” / investment loans (loans for purchasing commercial or residential investment property)
  • Less common exempt loans:  real estate broker loans for up to 2 years after purchase


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Frequently Asked Private Mortgage Questions (under Maryland law)

A: So long as you are a close enough family member to be exempt from mortgage licensure laws (e.g., parent/child, brother/sister, grandparent/grandchild), you can make a family loan to purchase property documented by a promissory note and have a purchase money mortgage (deed of trust) recorded against the property.  
Arden Law offers flat fee loan packages for family loans, browse our site or contact us for more information.  (Note that the classifications are very narrow - some types of loans that used to be allowed in Maryland, like aunt/uncle to niece/nephew, are no longer exempt). 

A:  If you are looking to lend someone money to buy real estate in Maryland, you must either be a licensed lender OR fit in a recognized exemption.  A “hard money” loan is usually no diferent than others in the legal documentation - you’ll typically want a lawyer drafted note and security instrument (deed of trust / mortgage).
We can’t speak to matching up borrowers and lenders but on the legal side of things, if a lender and a borrower connect, you’ll need to make sure the loan is allowed in this state.  Generally speaking, someone who isn’t licensed can loan money for a commercial or investment purchases but cannot make consumer loans (or loans for property the borrower or their family will live in).  The hard money lender will need to have adequate documentation of the commercial nature - it is not enough to just call it a commercial loan. If you have additional questions you may want to set up a time to talk to our real estate attorney.

A:  Mortgage loans usually need to comply with both state licensing laws as well as detailed federal lending laws (like RESPA, etc.). For those reasons it isn’t easy to make a mortgage loan in Maryland unless you fit in an exemption. However, SELLER HELD financing is still allowed, assuming you have issued less than $1M in loans and want to make a loan to allow someone to buy  property you currently own.  Our law firm assists with documenting such loans In MD for a flat fee, you are welcome to reach out to us to see if we can help.  

A:   Usually loans have 2 parts - the promissory note (or “IOU”) and the secured part (for real estate, the mortgage or deed of trust).   If you are talking about a mortgage loan, this would typically be an exempt loan package drawn up by an attorney.  Note: it is very important to set this up in a timely fashion (generally so the loan documents are recorded at the same time as the purchase or immediately thereafter) or you may unwittingly have volunteered to pay extra recordation tax.  Our firm assists with family mortgage loan documentation if you want to reach out for more information.  

A:  Not to be confused with a deed into trust, a “deed of trust” is basically a mortgage.  In Maryland, mortgage loans have two main parts - the promissory note (or “IOU”), which is a private document held by the lender and the deed of trust which is the security instrument (document) that ties the loan to the house which is recorded in the Land Records.
It is called a deed of Trust because the borrower gives a third party Trustee the right to sell the house if the borrower stops paying the loan. Without the deed of trust there would be no lien against the house.  While there is a technical difference between a true “mortgage” and a “deed of trust”  in Maryland the two terms are used pretty interchangably and almost always a lender means deed of trust when they refer to a mortgage in this state. 

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