Owner Financing Deal Analysis

[Mike Cartmell]

Hey All,
I have a potential buyer that is interested in purchase the property with owner financing. He has 100k to put down but would like me to finance the rest. I have an existing mortgage on the property.

1st Mortgage: Balance of $147,000; PITI Payment of $1043.14 @ 6%
2nd Mortgage: Balance of $20,000; Payment of $220.68 @ 8.45%

The property is listed at $215,000 now. Should I do this deal. Below are some questions I have:

1. I was intending to take the down payment and payoff the 2nd note. Should I refinance the first at today's rates?
2.What interest rate & term should I charge him? I was thinking 9% for 30 years with a 5 year balloon.
3. What are you general thoughts on this deal, any advice is greatly appreciated.

Thanks,
Mike

[Bill Gulley]

Hi Mike, A credit union usually sells the loans to the secondary, but they might be holding it considering the LTV. This is going to take several phases, refi the first with your buyer? Payoff the second. I assume the reason your buyer isn't just buying conventionally is due to credit or perhaps job, but you should be concerned about these issues as well
A credit union can be easy to work with. I'd suggest both of you go on the first mortgage as joint tenants in common. You can sell him a one half undivided interest. Then have him buy your interest out by paying the mortgage off and you do a special warranty deed to him when you "close" your other half interest. I'd have a separate security agreement with him concerning the existing mortgage with a quit claim deed held if he gets behind on that note or your balance as a second. Payoff the second. Is that something you can work with?

This is a good example of creative financing that uses real estate basics! Straight forward. And, Since both of you are on title, I don't see any SAFE Act issue here either. PM me if you need assistance, Bill