Seller financing mortgage
Seller Financing Mortgage is a private mortgage agreement between the homeowner and homebuyer.There are no financial institutions like banks, credit unions etc involved in providing credit facilities in seller financing mortgages. Homeowner sells his home to a person while providing finance by way of mortgage. Thus, lien is kept on home by the home seller and when home buyer repays the full amount, mortgage lies is removed. Seller financing mortgage is very popular in countries like United States. Many experts feel that seller financing is an affordable and easy alternative to bank loans.
Seller financing mortgage is very powerful in bringing seller and buyers together and home buying deal is closed in a very quick manner. It should be understood here that seller financing is beneficial for both the parties rather than homebuyer alone. This is because homeowner is able to sell his home easily while retaining homeownership till mortgage is paid off. He is not required to take any type of risk. Many people sell their homes by seller financing mortgage due to the fact that they do not wish to make any costly repairs in house. Such people sell home on as is basis. Various types of security documents used by seller for securing his home include land sale documents, deed of trust, mortgage documents etc.
Seller financing is also termed as second mortgage by some people. There are many benefits achieved by way of seller financing mortgage. First of all, homebuyer and homeowner are able to save substantial amount towards closing costs. Had mortgage loan taken from a financial institution like bank, a person would have to pay huge closing costs. Second advantage of seller financing mortgage is that both parties can easily negotiate on repayment schedule and interest rates. Other terms and conditions can also be decided in an easy manner. Normally, seller would charge interest rate equal to existing standard mortgage rates. Third benefit of seller financing mortgage is that homebuyer is able to make special requests. For example, a home buyer can make request for keeping household appliances. Even vehicles are included in overall seller financing mortgage deal some times. Fourth benefit is no requirement of homebuyer qualifying for a loan underwriter. Similarly, there are no PMI insurance premiums in case of seller finance mortgage. Seller is also benefited by getting higher yields on investments as he is able to get his equity in home back along with interest. Sometimes, when property is located at prime location, seller is able to get higher interest rates than rates prevailing in market. Good location increases the negotiating power of seller considerably and he can make good money by way of higher interest rates and higher home value.
As far as disadvantages are concerned, homebuyer is not able to receive the documents of home till mortgage is fully paid. If seller has obtained finance against same home and is not making regular payments, home can also be foreclosed despite the fact that homebuyer is making regular payments.
Other Articles
