OfflineFollowing is a private message I received:
Hi Nathan, sorry to bother u. I just had a question re. owner finacing.
The selller finances 20% of the sale price for 2 years. Can he charge whatever interest he wants?
Also what happens to the remaining amount from the sale price?
Here is my answer:
If the seller creates seller financing for 20% or any percent of the purchase price the interest rate cannot be changed to whatever he wants. The interest rate needs to be changed in accordance to the contract. If a contract (note or mortgage) defines the interest rate at 5% the interest rate stays at 5%. The time the interest rate can change is when the contract says that it is variable...but there has to be something that the variable is set at or based upon, such as if prime rate goes up so does your interest rate.
As for the rest of the 80% of the purchase price (20% seller financing subtracted from 100% of the purchase) this is paid some other way. This would mean you would need to come up with 80% cash or other loans. Because the seller is willing to give 20% financing does not mean the other financing is wiped out, it still has to be paid some way.
I hope this information helps any that have had similar questions. If you have further questions about this please place them below and I am sure they will be answered by myself or other knowledgeable contributors to the site.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
Thanks for sharing this with all of us. I loveeee seller financing. Jan and I always try to get 100% financing from sellers. From what I understand, if your seller is financing for a year, or 3 years , or whatever it may be, towards the end of the term, if you go to the bank for your mortgage they will look at it more as a refinance because they will see your records of paying seller on time for the term. So it will be eaiser to get money from the bank.
Jeremy
This train, Dreams will not be thwarted
This train, Faith will be rewarded
Big wheel roll through fields where sunlight streams
Meet me in the Land Of Hope And Dreams
Bruce Springsteen
nstreet, is jeremy correct as how he understood it below? is it 3 years really or can it be earlier?
From what I understand, if your seller is financing for a year, or 3 years , or whatever it may be, towards the end of the term, if you go to the bank for your mortgage they will look at it more as a refinance because they will see your records of paying seller on time for the term. So it will be eaiser to get money from the bank. --
This answer is best defined by your mortgage broker.
Most brokers can actually do refinances in the first month. This is usually called a no-seasoned or no seasoning refinance. These types of refinances are becoming harder to do when the chain of title is less than three months. However, there are some that can still do the no seasoned refinances (one month refinance) and others that can do three month refinances.
As a whole most banks and financial institutions prefer that you own the home for one year or longer but again there are those that can do the refinance faster.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125