Owner Finance
Owner Financing: A Simplified Guide
The idea of owner finance can be a benefit for both parties meaning the buyer and seller. A seller will lend money to the buyer and the buyer will make payments to the lender over some duration, usually determined in the deal. In this case there will be no need to receive bank loans for mortgages and provides financial benefits.
How it works
Usually when you get loan from the bank, the buyer will adhere to the banks rules of interest, amount, and repayments, and if not suffers the consequences of the bank seizing the property. While a deal of owner finance the buyer will make small payments to the owner over a set duration and then once reaching the end the buyer will make one last big payment to close the deal.
Benefits for Buyers
- Easer Qualifications: Buyers will be able to obtain the home regardless of credit history.
- Faster Closing: The process of closing the deal on a property is much quicker compared to deals with the bank.
- Flexible Terms: While at banks the bank makes the terms of interest rates, payment times, and what the down payment amount is in which they aren’t negotiated. But in owner finance all of this can be negotiated.
Benefits for Sellers
- More Potential Buyers: If you open yourself open by doing owner finance than you will be more inclined to receive an increase in buyers
- Steady Income Stream: You will literally be making income each month just by doing nothing
- Higher Selling Price: Sellers might able to demand a premium because of the financing
Risks and Considerations
- For Buyers: There is chance that the seller might charge a high interest rate and also you will have to deal with that last payment which could be a lot, and it might be an amount you don’t possess or could set you back.
- For Sellers: There is a possibility that your buyer might not make the payments on time, due to that you as the seller might have to foreclose.
Conclusion
For people who aren’t good with making loan payments on time, and sellers needing a way to make passive income, owner financing is good way to make some passive income. But note that it is wise to understand the legal implications of such an agreement.
If you want to learn more about Owner Finance head to Blue Notary.
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