Owner financing — also known as seller financing — lets buyers pay for a new home without relying on a traditional mortgage. Instead, the homeowner (seller) finances the purchase, sometimes at an interest rate higher or lower than current mortgage rates, sometimes with a balloon payment due after a few years.
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Owner Financing Sample
For example, a homebuyer wants to purchase a historic home that doesn’t qualify for a conventional mortgage due to its age, condition or building type. The borrower offers to purchase the home for $800,000 with a $250,000 down payment — just over 30% of the purchase price.
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The seller agrees to finance the remaining $550,000 at an interest rate of 7% for a five-year term and amortized over 20 years — resulting in a balloon payment of about $470,000 due at the end of five years. Over the course of the loan, the buyer makes monthly payments of $4,260 and is responsible for property tax and insurance payments.
At closing, the buyer receives title to the home that is subject to a mortgage held by the seller. After five years of on-time monthly payments, the buyer makes the final balloon payment and the mortgage lien is released. #sellerfinanced #homebuyerstool
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Copyright © This free information is provided courtesy of L.A. Loft Blog with the information provided by Corey Chambers, Realty Source Inc, DRE 01889449; MPR Funding Inc NMLS 2000513. We are not associated with the seller, homeowner’s association, or developer. For more information, contact 213-880-9910 or visit LALoftBlog.com, Licensed in California. EAC22061502KT All information provided is deemed reliable but is not guaranteed and should be independently verified. Properties are subject to prior sale or rental. This is not a solicitation if the buyer or seller is already under contract with another broker.