Today’s topic is owner financing. We’ll discuss the benefits and disadvantages of this method from both a buyer’s and seller’s perspective.
If you’re a homeowner who is thinking about selling the property on owner financing terms instead of renting it out or selling it to a conventional buyer, the advantages are clear. You’ll be able to generate a pure income, for example. When you sell through owner financing, you won’t incur any additional expenses.
Another benefit is maintenance. It’s something you will have to worry about if you rent a home out, but won’t be an issue if you just sell outright. Finally, it’s an ideal investment vehicle.
As far as the disadvantages are concerned, selling the property will mean you have no right to future appreciation. It also comes with additional tax implications and fewer write off opportunities.
“Not all homes are available to purchase through owner financing.”
Now let’s talk about the pros and cons for buyers with owner financing. If you can’t get qualified for a regular mortgage, owner financing is the next best vehicle for purchasing a home. Your monthly mortgage payment will likely be equal to or even less than what you’re paying in rent right now. Owner financing allows more homebuyers to qualify for a purchase now and refinance down the road to get more favorable terms.
The other pro is the tax benefits I discussed earlier. Owning a home allows you to write off certain expenses to ease your tax burden.
The biggest con to buying a home with owner financing is the interest rate. Regular interest rates are around 3% or 4%, but owner financing rates are from 8% to 10%. These aren’t intended to be 30-year mortgages. The objective of buying with owner financing is working on your credit after you get the mortgage, then refinancing to a lower rate down the line.
Keep in mind that not all homes are available for purchase through owner financing. You should ask your agent about this if you’re considering it. I can send you a list of these properties, too.
If you have any questions for me about buying or selling a home with owner financing, don’t hesitate to reach out via phone or email. I look forward to hearing from you.
