Seller Financing
Definition of "Seller financing"
If buyers are considering a home with an assumable mortgage at a fair interest rate or if the sellers have already paid their mortgage, remember to consider seller financing. With seller financing, the seller determines the sale price and then acts much like a lender. He or she determines the amount of down payment and the others terms of sale. Seller financing becomes more common when interest rates are high and buying a home is out of reach for many who could otherwise not afford it. But regardless of interest rates, this option helps qualify people to buy who might not be able to qualify for a loan through a lending institution or who may have the income to afford monthly payments but not the cash for a down payment. With seller financing, borrowers whom lenders might consider marginally qualified not only may qualify to buy but also may save money because closing costs are often nonexistent or less expensive than with lender financing. Seller financing is treated as an installment sale for tax purposes, and the seller will be taxed only on the proportional amount of gain received each year. Finally, if the buyer defaults, the seller can take the property back under the contract or, if absolutely necessary, he can foreclose on the property. A seller can also offer a wraparound mortgage to a buyer who already owns a home. With this option, the seller makes a money advance to cover or 'wrap' the balance due on the old mortgage and the amount on the new loan at an interest rate below market levels.
Popular Real Estate Terms
Person or business that obtains mortgages for others by finding suitable lenders. The mortgage broker sometimes deals with collections and disbursements. Typically the mortgage broker ...
Rental based on a percent of sales or profit that in addition to the constant rental amount. ...
Alias is a different name by which a person is known.In the real estate world, there are times when an agent goes by a different name than the one he/she was originally named by his/her ...
People say time is money. The old-age cliche applies more than ever in our case as we define what the Time Value of Money (TVM) means. You’ll find the term time value for money ...
That portion of a loan collaterized by a leased property extending beyond the expiration date of the lease. For example, a lending institution collaterizes a 20-year loan on a commercial ...
making land more beautiful to look at by adding improvements such as lawns, trees, and bushes. Increases the value of the property. ...
Provision in a written agreement that depends on the occurrence of something else. ...
Same as term lateral support: The right of a landowner to have lateral land support from adjacent properties. The right of lateral and subjacent support means that an adjacent land owner ...
Misuse, alteration, destruction, or neglect of land by an individual right-fully in possession that breeds a significant and permanent reduction of its value to the legal interest owned by ...
Have a question or comment?
We're here to help.