A simple overview of how to use owner financing to your advantage.
In seller or owner financing, the seller takes on the role of the bank. Simply put, when a buyer makes a mortgage payment (installment loan) they make payments directly to the lender or seller.
This allows the seller to collect monthly payments and never receive a call about the property when it needs attention. Do you call Wells Fargo when the toilet needs fixed. No, you don’t. And neither would your buyer contact you about that. That’s just one major benefit.
These notes vary in length of time: for example, payments amortized over 30 years but with a balloon payment due in five years. Or the buyer is wanting to put $5,000 down with 0% interest and pay a purchase price of $80,000 amortized over 30 years with a 10 year balloon payment. This means the seller would have a Total Purchase Price of $85,000. Less the $5,000 down payment and would finance the buyer at $80,000 for the next 15 years. Monthly payment received of $222.27 a month and at the end of the 15 year term a balance of $40,230.87 would be paid in full.
Balloon payment is the remaining balance due at the end of the term. The theory is that, within a few years, the home will have gained enough in value or the buyers exit strategy will have improved so that they can refinance or sell the property at a later time.
From a seller’s standpoint, the timeframes are very practical. Most sellers can’t count on having the same life expectancy as a mortgage lending bank, or the patience to wait around until the loan is paid off. In addition, the terms can vary for what the seller considers important: Purchase Price, Down Payment, Monthly Payment or overall net income with interest.
The best way to make the most money over time is to be the bank and seller finance your buyer if you property is free and clear of any mortgage or liens. When banks lend to you there is a principal and interest amount built in to your payment schedule. See graphic on how much money goes toward principle and interest over time. Try this Amortization Schedule Calculator and play around with the numbers to better see how this plays out.
So in a nut shell, if YOU are holding the note for your buyer you can collect interest on the payments. Imagine if you could collect something like this for the next 10, 20 or 30 years. You’d have “forever” income. Your buyer would be paying you more over time with no worries of Property Insurance, Repairs, Tenants, Toilets or Termites. Just sit back and get paid every month like the banks do!
This process is simple, fast, and uses no Realtors or Agents. This means no commissions, no fees, and no closing costs to you! We pay all the closing costs with every property we buy. If a cash offer isn’t working for you, we have this option available as well!
If you have a freee and clear property in Jacksonville North Carolina then this may be of “interest” to you.. yes, pun intended! By allowing US to be your buyer we take care off:
- Closing Costs
- HOA Fees
- All Responsibilities as a Homeowner