What is the typical rate on a owner financed property?

Question

What is typically the rate charged on a owner financed property? This would be for a very short term of 3 years maybe.

Is it fully amortized and does it include/require down payment and/or balloon payment?

thanks!

Account Closed · Answer

I would say that there is no typical rate or terms. All terms for this type of transaction are fully negotiable between buyer and seller.

Be sure to have the mortgage drafted by an experienced real estate attorney. The relatively small upfront legal cost could save you thousands down the road.

Peter Tverdov · Answer

I made several offers recently with owner financing on properties. Offered 10% down, 30 yr amort/ with 10-15 yr mortgage terms @ 5% interest. Rates right now for a 30 yr are 3.5%

Patrick Boutin · Answer

Account Closed, thanks for the tip on the Escrow/title. the property is not a meth house but it is in bad shape and it is not very big. That being said, yes it feels like the terms the agent set up in the agreement are much too lax on the buyer's side. I believe he is not asking much because the property is in dire conditions therefore there aren't that many interested parties.

Given that the sale price is low I can't really do a term longer than 2 to 3 years. If I were to accept the 0 down, can I do a much higher interest? say 15% or is that considered usury. Otherwise I'm thinking maybe this is too much of a hassle and I should just wait to find a cash buyer...

Patrick Boutin · Answer

Thanks for the response everybody!

Account Closed he isn't putting anything down. His skin in the game will be the "sweat equity" after he cleans up and fixes up the place. The agreement the agent had in mind was to stipulate the renter "buyer" would stand to loose anything if there was a default. Any thoughts?

Account Closed · Answer

You need a properly drafted mortgage and a review of usury laws in that state.

In OH where I am, title/escrow companies cannot prepare legal documents such as mortgages, deeds, assignments. So you need to check the laws of that state.

Account Closed · Answer

Being two thousand miles away is even more reason to find a good attorney. I can't speak to rates for legal work other than it's probably cheaper than CA lawyers near you.

Steve Vaughan · Answer

Most of mine are at 6% with 10% down over 24yrs.

The newest is a couple years old, though.  I would try for the same, but at 5%.  Depending on how many references you have and how sound your credit and stuff is @Patrick Boutin, 5% may be obtainable.

Patrick Boutin · Answer

Thanks @Peter T. that does give a good idea on what is typical.

Garrett May · Answer

Peter,

Thanks for the information. I, too, am trying to find the idea rate for owner financing.

Matt H. · Answer

Keeping in mind this can vary widely: I would say seller financed interest rates would generally be above standard bank rates yet lower than hard money.

That is the question asked. Beyond that interest only or amortized is negotiable, no big deal there, both standard. I would say a no down payment is silly. Three years isn't necessary short in this scenario. Balloon certainly not uncommon.

You later said nothing down and the whole payment goes towards the purchase - that's no down payment and 0% interest. Those terms seem asinine unless is built on a large pile of old military ordnance. Or it's a meth house.

Escrow/title can usually do it for a nominal cost as opposed to an attorney.

What is the typical rate on a owner financed property?

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