When selling a home, most sellers expect buyers to secure a traditional mortgage through a bank. However, seller financing—also known as owner financing—is an alternative method that can benefit both buyers and sellers. This strategy allows the seller to act as the lender, providing financing to the buyer directly.
If you're considering selling your property and want to explore your options, seller financing might be a solution worth considering. Let's dive into how it works, its benefits, and potential risks.
What is Seller Financing?
Seller financing is an arrangement where the seller provides a loan to the buyer instead of the buyer obtaining a mortgage from a traditional lender. The buyer and seller agree to loan terms, including the interest rate, repayment schedule, and loan duration. The buyer then makes payments directly to the seller until the loan is paid off or refinanced.
How Does Seller Financing Work?
Negotiation of Terms – The seller and buyer agree on key terms such as the loan amount, interest rate, down payment, and repayment schedule.
Promissory Note & Agreement – The buyer signs a promissory note outlining the terms, and a mortgage or deed of trust may be recorded to secure the loan.
Buyer Makes Payments – The buyer makes monthly payments to the seller, similar to a mortgage payment.
Loan Maturity or Refinancing – The loan may have a balloon payment at the end, requiring the buyer to pay off the remaining balance, usually by refinancing with a traditional lender.
Are you currently looking to explore your options? Let's talk!
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