Interest Rate when selling on seller financing

1 Reply

Originally posted by @Brian Cooke :

If you are selling a property with seller financing, how would you determine the interest rate you ask for?

 What I most commonly see when people go to refinance out of this is one of two things:

- HML-like rate/terms. Call it 10% interest only.

- The buyer is family/friend. Fannie Mae-like rate, but interest only, is what I see.

A good chunk of the time if it's an amortized loan rather than interest only, there's a big fight over what the current balance is at the point of refinance. I suggest sticking to interest only unless you are going to subcontract to a loan servicing company. 

Something you can do as a private seller carrying a note, that I cannot do as an institutional lender, is tack closing costs onto the loan balance. If you're looking to sweeten the pot during negotiations, consider throwing that out there. 

Watch out for throwing a balloon payment on it. Much of the time if they can't qualify for FNMA financing today, they will not be able to qualify in X years either.