Factors to Consider When Opting for an Owner Financing Homes
There are many ways on how you are able to sell your house. An owner financing is one of the options that you can have. Whenever the buyer will not be able to secure a loan then it is this option that you can choose to have. Choosing this one is an option that you can have once the buyer doesn’t have any cash on hand.
If it is an owner financing is what you will be choosing to have then you will need the buyer to proved you with a down payment. Whenever the buyer will default then it is the down payment that will be the money that they will be willing to lose. You need to know that you can set the down payment at around from 5-20% or more.
The interest rate is also another factor that you should know once you will be choosing an owner financing. Whenever owner financing is what is done then it is also the one that will let the seller dictate the interest rate that they want to have. If there is a very high interest rate that the seller will have then the buyer might get discouraged. Once the seller will be looking at the interest rate then the best thing that they can have is between 5-7%. It is the seller that can opt for a higher down payment like 20% or more.
It is also balloon payment that you should be able to understand. Whenever it is this one is what you will choose to do then you can choose to amortize your loan for over 30 years. It is at the end of 10 years where you should include the balloon payment. It is the 10 years that can help the buyer improve the financial situation that they have.
Whenever it is an owner financing is what the seller will be tong then it is them that can benefit from it. Getting monthly income, the installment payments from the buyer increase your monthly cash flow, ask for a higher interest rate, get a higher sales price, If the buyer defaults, you keep your house, the down payment, and any extra cash, sell and close fast here since there’s no mortgage process, and you can also sell your house without making costly repairs are the advantages that the seller will be able to get.
The buyer will also get some advantages from this one which is a faster process, no bank loan process to approve the application, offers a cheaper closing, no extra fees including bank fees and appraisal costs and provides a flexible down payment.
The seller might not have the option to offer balloon payments. A lawyer can advise you to go through the foreclosure process which can happen if the buyer defaults, you may end up paying for repairs and maintenance costs. And these are the advantages of an owner financing.
The buyer can also experience disadvantages with owner financing as it can lead to higher interest rates, the interest rates are usually higher than the bank loan interests, the buyer needs the seller’s approval, if the seller has a mortgage loan, the bank can demand immediate payment, the buyer can either pay the debt in full or go through the foreclosure process.