WHAT IS SELLER FINANCING?
January 1995- February 1997
Simply put, it is when the seller of a property finances all or part of the sell of the property.This is set up similar to a traditional loan, the buyer will pay interest in a monthly amortized loan.Usually this is done through an escrow account to protect both buyer and seller.
A Typical structure for a Seller Finance Purchase
Sales Price $250,000.00
Buyer puts 20% Down Payment $50,000.00
Amortized for 30 years with 8% Interest
Monthly Payment $1,467.53
7 Year Balloon Payment $184,954.86 (buyer pays the balance of the loan in seven years, This is referred to as a balloon payment)
Total Money Paid $358,227.38
While this example is a typical structure, the loan can be negotiated!
WHY WOULD A BUYER DO SELLER FINANCING?
November 1999- December 2000
- Seller financing is great for those who don’t qualify for conventional financing, You may own your own business or are a sale person. Banks won’t loan until you can show steady income. While sellers will still want proof that you can pay they do not have the strict guidelines that banks may have.
- Your payment may be lower, as the seller may not require PMI (Mortgage Insurance).
- Stop Renting! you may be paying more in rent then if you purchased a home!
- Real Estate is one of the best investment you can make. Real Estate goes up in value with time, gaining equity instead of throwing your money away in rent.
WHAT ARE THE CONS OF SELLER FINANCING
April 1997- October 1998
- Typically the interest rates are higher then a standard loan
- Most seller financed deals have balloon payments ( A lump sum payment after a period of time). This just means that you will have to refinance the property after 7 – 10 years