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How do I know how much interest to charge for holding a 50% mortgage for my buyer for 10 years?

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am planning to buy a lot and the seller wants to finance the lot loan with me for 18 mos for 80%, I will pay the 20%. What if he gets bankrupt and cannot pay the mortgage of the lot and I keep on paying my own part to him.

Like | Dislike | Share | Posted: Mon, 08/04/2008 - 10:24 | Post subject:

helping_user's picture
helping_user | Joined: March 31, 2006 03:39 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Welcome Gigi.

It can be quite a tough situation if the seller files bankruptcy and stops paying for the mortgage he has taken. Once you complete paying the lot loan, you will be the sole owner of the lot. So, chances are that the mortgage company may come after you for the payment. But why do you think the seller will be bankruptcy?

Like | Dislike | Share | Posted: Mon, 08/04/2008 - 23:44 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I am selling some acreage. My buyer has offered to pay 50% of the cost down, and wants me to finance the rest over 12 months. How do I arrive at an appropriate interest rate?

Like | Dislike | Share | Posted: Thu, 10/30/2008 - 18:29 | Post subject:

jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Melinda!

It will be better if you can involve a real estate attorney dealing with owner financing. The lawyer will help you to decide a reasonable interest rate which the buyer will be able to pay and you will also be having some profits.

Thanks.

Like | Dislike | Share | Posted: Thu, 10/30/2008 - 22:39 | Post subject:

Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

i am the seller, my prospective buyers are unmarried,she with a 743 and the him with zero credit and self employed. Agreed Sale price of the house 170K,(house was listed at 185k) they have offered a down payment of 9500, with a 5 year payoff , interest rate of only 5.5%. House might appraise in todays market at 140K according to my broker, what is your opinion?
thank you

Like | Dislike | Share | Posted: Sun, 06/07/2009 - 09:34 | Post subject:

eric1's picture
eric1 | Joined: January 4, 2009 03:52 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

I think your interest rate is low. They will not have the ability to get a rate less than 6.5% with the scenario you just proposed. Plus they will not have PMI with you or closing costs.

Raising the interest rate will help buffer yourself by collecting extra money from them along the way in the event that they cannot finish making the payments.

Like | Dislike | Share | Posted: Sun, 06/07/2009 - 15:02 | Post subject:

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