In classified sections nationwide you’ll come across the term ‘owner financing’. Owner financing means that the buyer of a home makes 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.
If a seller decides to sell this type of loan, there are many factors to consider. An investor sees this as just another note, so he’s going to have some questions about the condition of the home, the kind of people that bought it and if they are making their monthly payments every month on time.
If you’re a seller, there are a couple of advantages to owner financing. Buyers will happily pay you market value and more, because of the special nature of this deal. They are motivated by the fact they don’t have to go and qualify for a mortgage.
Owner financing also makes the house sell faster. Because of the special financing option, you will see more interest than with a regular offer. You can also increase the value of the loan note by charging a higher interest.
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.
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