Should You Go For Owner Financing?

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.

When trying to offload this type of loan, there are a lot of factors to consider. An investor wants to know the condition of the home, the situation of the buyers, if the buyer is making their monthly payments etc. They see it as just another note to buy and they want to have a certain kind of security backing it up.

For a seller, owner financing has a couple of upsides. First, you can sell the house for market value or slightly above. Buyers who are attracted to owner financing care more for the fact that they don't have to qualify for a regular 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 is also pretty clear. There is a chance that the buyer stops paying. If so, the home will get into foreclosure with all it's consequences. This is why you need to choose your buyer carefully. You can get some great monthly cash flow, but it can also fall apart, so choose wisely.

About the Author:

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