Simple Interest Mortgage

[LaVerne Mitchell]

Is anyone familiar with this scenario where a person buys a house with equity allows buyer to pay  3yr simple interest mortgage( pay interest) then sells to buyer to refi or purchase?

[Gilbert Dominguez]

Well its nothing out of the ordinary for an owner financier to make such an offer. All they are after is earning money on their money so they maybe offer an interest only loan for 3 years. However that I know of owner financing cannot ask for a balloon payment in their terms unless they are selling a house to an investor not an owner/occupant. Owner financing must now be an offer for a full amortized loan. For example they can amortize the loan for 10 year, 20 years, or 30 years and be due the payment only with interest if they want or they can offer an interest only loan. The terms of the loan being for only 3 years maybe be possible or even legal but I would verify this with an attorney that is familiar with Dodd Frank and the Safe Act. Which are basically consumer protection laws. 

I would not sign any owner finance loan unless I have an attorney review it.