Our property is paid off and we're considering selling and offering to finance. What's a reasonable interest rate to charge? Is there a formula - like prime + X%? Input is appreciated! Thank you.

Account Closed Thank you so much for your input! I will dig into this info more. I appreciate your help!

There are strict laws in becoming a lender that were put into place after the mortgage melt-down in 2008. These are some notes I took when I was researching doing this in CA. You should look into what you can do where the property is as far as that state's laws. This is what I learned for CA. Also, at least in CA, it's hard to foreclose on them, if they default. You have to work with them to try and keep them from getting foreclosed on.: *****California codes on mortgages on real property: https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=CIV&division=3.&title=14.&part=4.&chapter=2.&article=2. Code 2954 - looks like I could require part of the payment includes money for paying taxes - if - the original mortgage is 90% of the sales price - so, 10% down by buyer - or - it’s mutually agreed upon and it’s made clear to buyer they don’t have to agree. 2954.9 - buyer can pay off loan at any time. ***buyer can agree to a prepayment clause. -Prepayment penalty can only be imposed in first 5 years of mortgage. -Buyer can prepay a max of 20% of original mortgage amount in any 12 month period without penalty. -prepayment charge on a prepaid amount over 20% of the original mortgage in any 12 month period, can only be a max of 6 months advance interest on that amount (over 20% of original mortgage). https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=CIV§ionNum=2954.9. 2954.11 - laws regarding making sure buyer understands any prepayment clause.

@Mary P. Usually when selling with owner financing you have to follow the Dodd-Frank Act rules. The main aspects of the Dodd-Frank are proving the buyers has the ability to pay, no balloon notes, and fixed rate interest for five years. Now there are more aspects to it but these are the main ones. The interest rate aspect is not very well spelled out and I would base it on the state laws. The interest rate can increase after the 5-year fix period by up to 2% a year up to max increase of 6% from original rate. Dodd-Frank does mention something about interest rate being tied to an index but not well defined.

Interest rate if I hold the mortgage and owner finance for buyer?Interest rate if I hold the mortgage and owner finance for buyer?

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Interest rate if I hold the mortgage and owner finance for buyer?

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