Seller Financing: What interest you offer the seller?

[Zaid R.]

What interest do you usually offer a seller in a creative financing deal??

I'm in negotiations with a seller who owns her property free and clear and she liked the idea of getting a down payment and carrying a note for the rest, she called me hours after and asked me for interest (she asked for 4%)

Any/all input is welcome and appreciated

[Will F.]

First off 4% for seller financing is a GREAT rate assuming it's a 30 year fixed. Usually sellers want a premium for seller financing of 1-2% higher than current mortgage rates.

Yes @Christina R. It's called the AFR - Applicable Federal Rate.

The IRS enforces this and releases an AFR monthly. If you lend at below the AFR there are tax consequences. It's to prevent people from just doing 0% loans or getting around gift taxes.

Current AFR is 3.29% for a long term loan. ie.30 year loan

https://tax.thomsonreuters.com/products/brands/checkpoint/ria-wgl/afr-rates