Posted on: 01st Oct, 2009 12:55 pm
My dad owns a few acres free & clear. A neighbor wants to buy the property and has asked my dad to let him pay monthly payments (owner financing) instead of getting a loan. This is raw property and the amount is about $20,000. I am trying to talk my dad out of doing this since the amount is rather low. What are the pros/cons of holding the mortgage and how should the monthly payment and loan term be calculated. My thoughts are a loan term of no more then 5 years with several thousand put down as a down payment. The people who want to purchase the land is planning on moving a mobile home on the property.
Any suggestions are appreciated....thanks
Any suggestions are appreciated....thanks
The pros: You get to sell the property, get cash right away in the form of the down payment and monthly income from the monthly mortgage payments
The cons: You do not get all the cash right away. If they do not pay monthly, you do not get the monthly income and may have to foreclose
The cons: You do not get all the cash right away. If they do not pay monthly, you do not get the monthly income and may have to foreclose
Hi mhoward,
I agree with John. If you sell the property you will get money as the down payment. In addition to that, you will also receive a monthly payment each month, out of which you can keep the money in excess of the monthly mortgage payment.
However, there is no guarantee that your neighbor will continue making the monthly payments throughout the term of the mortgage. What will happen if they stop paying? You will then have to come up with the monthly payments out of your own pocket to stay current on the mortgage. Otherwise, the lender will take over the possession of the property in case of a default.
Why do your neighbors not want to get a loan to make the purchase? Do they not have good credit to qualify for a loan? If that is the case, then you will have to be very cautious before entering into any sort of owner financing agreement with them.
I agree with John. If you sell the property you will get money as the down payment. In addition to that, you will also receive a monthly payment each month, out of which you can keep the money in excess of the monthly mortgage payment.
However, there is no guarantee that your neighbor will continue making the monthly payments throughout the term of the mortgage. What will happen if they stop paying? You will then have to come up with the monthly payments out of your own pocket to stay current on the mortgage. Otherwise, the lender will take over the possession of the property in case of a default.
Why do your neighbors not want to get a loan to make the purchase? Do they not have good credit to qualify for a loan? If that is the case, then you will have to be very cautious before entering into any sort of owner financing agreement with them.
as a safety measure, you can make them coowner. & sign a quit claim deed at a later stage
co owner is good option
what benefit to our seller is making this neighbor a co-owner? are you serious when you write these things? it is incomprehensible to read some of this absolute drivel i see.
please, mhoward, pay no attention to those two. they seem to be joined at the hip in folly.
please, mhoward, pay no attention to those two. they seem to be joined at the hip in folly.
We have asked to make neighbour a coowner so that he continues to make payment as agreed.
Hi hemsleysue,
May I know how making the neighbor co-owner guarantees he will continue making payments as agreed?
Once the neighbor is added to the title and is made a co-owner, he will have an ownership right to the property. But this does not make him liable for the mortgage payments. What will happen if he stops paying as agreed? How can he be removed from title as co-owner at a later stage, if he denies giving up his share of the property?
May I know how making the neighbor co-owner guarantees he will continue making payments as agreed?
Once the neighbor is added to the title and is made a co-owner, he will have an ownership right to the property. But this does not make him liable for the mortgage payments. What will happen if he stops paying as agreed? How can he be removed from title as co-owner at a later stage, if he denies giving up his share of the property?
thank you jenkin7 for a note of truth and sensibility you just added to this thread.
That was really a interesting post by hemsleyus
i just don't get it at all
Me too, that why it is making it interesting
George, When I was in school, I had a poster it said " Normal is boring"
George, When I was in school, I had a poster it said " Normal is boring"
yeah, well abnormal can get on one's nerves.