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Creative Financing Technique #1 - Seller Financing

What is Seller Financing?


Seller financing has many nicknames. Commonly referred to as “buying on terms,” “purchase-money mortgage,” and “owner financing,” each of the foregoing names refer to the same form of creative financing in which a property owner also serves as a mortgage lender, eliminating the need for a financial institution to handle financing agreements. So, a “Seller Financing Agreement” functions along similar lines as a mortgage loan agreement, except that the debt is owned by and overseen by the home seller instead of a financial lender.


Advantages:


· Minimum down payments are not required

· Flexible agreement terms

· Lower closing costs/expenses

· Faster time to sale

· Allows for homeownership access to buyers with poor credit or who are unable to leverage commercial banks for lending

· Fewer regulations


Disadvantages:


· Higher interest rate

· Seller faces risks if buyer defaults on payment

· Buyers are still vulnerable to foreclosure if seller does not make payments to senior financing lender


Seller Finance with a TwistLand Contracts


A land contract is an agreement to purchase a piece of real estate that involves buyers borrowing money from the real estate owner until the purchase price is paid in full.


Seller Finance with a TwistAssumable Mortgage


An assumable mortgage is a type of home financing in which buyers are given the opportunity to purchase a home by assuming responsibly for and take over the seller’s current mortgage.


Seller Financing with a Twist Lease Purchase


Also known as a rent-to-own contract, a lease purchase agreement speaks to a form of agreement under which renters pay sellers an option fee at an agreed-upon purchase price that gives the renter the exclusive option to purchase the property at a later date.


Seller Financing with a Twist Land Loans


A land loan is used to facilitate and finance the purchase of a plot of land for later use for residential or business purposes.


Seller Financing with a Twist Holding Mortgage


Under a holing mortgage agreement, a homeowner agrees to serve as a lender for the homebuyer, and provides a loan for the purchase, which the buyer repays by making monthly payments to the seller. The seller continues to hold the property’s title until full loan repayment has been made by the buyer.


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