Posted by Debra on January 28, 2000 at 09:38:31:
nt
Question about owner financing… - Posted by Debra(SC)
Posted by Debra(SC) on January 27, 2000 at 11:04:20:
I’m confused. If a seller takes back owner financing on a $29,500 home I’m buying at 4% interest for 203 months (which equals $40,600 if loan is paid out to the end), what happens when I sell the home for $34,500? Do I just pay the total of remaining payments to the person I bought from or do I just pay the balance of the principle minus the amount of $$ I have paid up to the point I get someone to buy from me? I think I explained that right).
Another thing, how do I get the seller to take seller financing without interest? Do I just don’t mention it and hope he doesn’t either?
Many thanks,
Debra
Re: Question about owner financing… - Posted by GL
Posted by GL on January 27, 2000 at 11:55:39:
Every mortgage includes 2 payments, and interest payment and a little bit of principal repayment.
For example if your mortgage was for $20,000 at 7% the interest would be $116.66 (not exactly but pretty close).
That is the rent (interest) you pay to go to the money store (bank) and rent some money.
Now suppose you paid $125. That would be $116.66 interest (rent) plus $8.33 principal.
If you paid back $8.33 you wouldn’t owe $20,000 anymore. You would only owe $19991.67.
So the next month you would not owe $116.66 rent (interest) you would owe a few pennies less.
Every month the interest payment would get a little smaller and the principal payment would get a little bigger until the whole thing was paid off. The last payment would be practically all principal and no interest.
They work this out so it takes 20 years usually.
Meanwhile you pay the same payment each month.
Now if you go to pay it off, they have to work out how much of the principal is left unpaid, and that is how much you still owe.
Usually you don’t pay off the mortgage if you can help it. The new buyer “assumes” the mortgage, and takes up making the payments where you left off.
If you try to get the seller to take back a mortgage with no interest he will notice it, believe me. He may agree to it if he is desperate to sell, who knows? But you might as well be up front.
Here is a way to get people to take back interest free financing.
Put on the offer something like this: "Purchaser agrees to pay $10,000 down payment, $3,000 on closing and $7,000 on (a date 5 years from closing day).
A lot of people will agree to a deferred down payment where they will not agree to an interest free mortgage even though it is the same thing.
I understand everything except this… - Posted by Debra(SC)
Posted by Debra(SC) on January 27, 2000 at 12:14:00:
where do I get the $7,000 five years from now? Will it come from future RE investments I make?
Re: I understand everything except this… - Posted by Jeff Short
Posted by Jeff Short on January 27, 2000 at 12:30:27:
You could get the money from future RE investments… or from when you sell this particular home (assuming that you buying it for investment and not to personally live in).
It really doesn’t matter where you get the money from - just have a basic plan (and a backup) to have the money “available” when it is due.