Owner-financed properties

[FreeEnergy]

Gentlemen, a question.

Let's say I want to purchase a property, and want to do it owner-financed. Do owner-financed loans have front loaded interest, just like bankster loans do?

Another words, if it is a bad market, and I am buying owner-financed house, I want REAL 10% interest, i.e. every month the payment is split 90% equity, 10% interest. Or is it legally impossible?

[cedarchopper]

Doesn't work that way. Owner financing is the same interest bearing financial instrument as a bank mortgage.

If you do go the owner finance route, DO NOT accept a Contract For Deed...only a Deed of Trust!

[FreeEnergy]

Because of this?

So the banks placed a clause on all contracts that did not allow the seller to transfer or alienate the property without bank approval.

[cedarchopper]

I'm don't understand the context of the quote, owner financing is a negotiable contract, but nobody is going to finance you much different than a bank, except you may not get the same scrutiny of your financial history and income.

I've financed several properties and I bought one property with owner financing, it can be a good way to go if the property is a good value. My advise is to use a Title Company to facilitate the deal...no other way, period!

[FreeEnergy]

ok,

I am trying to find a way to go around front-loaded mortgages.

Front-loading is essentially a fraud. It is only 6% if you carry it for 30 years, in all other cases it is much higher. An average american moves every 7 years, my calculator tells me that the actual mortgage would be about 400% in that case (of the payments you've made in 7 years, 1/5 is principal, 4/5 interest).

[cedarchopper]

Pay cash, that's how you get around it. Other than that, you can accelerate your principle payments and knock a lot of interest and years off the loan.

[FreeEnergy]

yep, prepaying and not falling for "refinance" lie (that is when your interest resets sky-high again) I guess is the only way out.

If average american who churns house every 7 years is paying 400% instead of 6% - that is as close to fraud and false advertising as one can get... and not rot for life in jail.

:P

[cedarchopper]

It really isn't the same situation as when dealing with the banking system...the person owner financing you is not fractional reserve lending, they are selling you the property with a depreciating medium of exchange that will have less and less purchasing power over the life of the loan.

Another caution I would advise is to not agree to a "balloon" on the note. Just a straight up 15 or 20 year fixed note. Bargain hard on the terms of the loan...the devil is in the details ;]