Re: How to set up owner financing. - Posted by Chris in FL
Posted by Chris in FL on March 30, 2006 at 13:14:10:
Brett, I am pretty good at math, but compound interest amortization is too complicated to figure out in most cases. You need to use an amortization chart, financial calculator, or, what I frequently do, have the title company prepare an amortization schedule for me. Here are a few other tips for people considering owner financing: 1) if possible, set up buyer for EFT (very nice), 2) usually owner finance suggests buyer can not qualify for traditional financing - this means you should get above average interest rates (I personally would not consider less than 9-12%, 3) either have a track record with buyer (i.e. - been leasing from you already and paying good) or a sizable down payment, because you need to cover the risk of a possible foreclosure, 4) banks and HMLs charge closing costs or points, and you should be able to as well (pick up a few points, up front or add to loan balance). 5) if it is possible you will want to cash out prior to payoff, do yourself a favor and put a balloon in the mortgage (makes the mortgage much more valuable should you decide to sell it), and 6) many paper people suggest splitting into two mortgages, so you could later sell a big first mortgage without taking much discount, and keep a small second for mailbox money. Hope this helps. Good luck!
-Chris in FL