Is Owner Financing An Option For You?

By Sarah Bennet

You may have heard the term 'owner financing' before. It enables the buyer of a home to make the monthly payments directly to the seller of a home.

the advantage of owner financing for a buyer is that it allows him to purchase the home without applying for a mortgage. Because the loan is profitable for the seller, he can choose to sell the loan to an investor for cash.

An investor is going to ask some questions when a seller tries to sell this kind of loan. Of course, investors see this as just another note, so they want to have some information to back their investment up. They will ask about the condition of the home, the financial situation of the buyers and maybe most importantly: are they making their monthly payments every month?

Owner financing the sale has a couple of advantages. It gives you the possibility to sell at the price you want. Buyers are happy to pay market value and maybe even more, just because they don't have to go and qualify for a mortgage.

With owner financing, you can sell faster and charge higher interest rates for the loan. Because of the special financing, many people will be interested in this type of deal. If you increase the interest rate, the loan note automatically gets more attractive to an investor.

The disadvantage of owner financing is also pretty straightforward. The buyer may decide to stop paying the monthly dues one day. Because you're still the mortgage holder, all the costs and trouble of foreclosure are your problem. That's why you need to be very careful and select the right buyer when doing owner financing.

About the Author:

Sarah is a financial advisor writing about mortgages and finance. She also writes about berekenen maximale hypotheek and hypotheekadviseur in Dutch.