Posted on: 02nd Jan, 2010 01:42 pm
Is the typical interest rate for owner finance 2% above prime?
What if the buyer only needs 1yr. of owner financing should the interest rate be less?
What is the typical down payment and terms on owner financing?
What if the buyer only needs 1yr. of owner financing should the interest rate be less?
What is the typical down payment and terms on owner financing?
In my opinion, the rate for owner financing should be much higher than what a buyer could get elsewhere. The reason I say that is if the buyer needs owner financing then he/she probably is having a hard time finding financing from a traditional bank due to the loan scenario and risks. So, if the seller is willing to take on that risk, then the rate would have to be higher to offset that risk.
The term of the owner financing should not impact the rate. The down payment required is entirely up to the seller.
The term of the owner financing should not impact the rate. The down payment required is entirely up to the seller.
and i have to concur. taking on risk is not meant to be cheap. if your borrower does have challenges that prevent lenders from granting a loan, and you've got enough confidence to do so, despite your better instincts, then you ought to charge a rate commensurate with the risk. treat it like a 30-year loan (forget that 1 year period) and charge a rate higher than what's typically found on the mortgage market.
your down payment requirement ought to be sufficient that a borrower wouldn't feel it easy to walk away from.
your down payment requirement ought to be sufficient that a borrower wouldn't feel it easy to walk away from.
