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Seller Financing
When the property seller acts as the lender, allowing the buyer to make payments directly to them.
Definition
Seller financing (also called owner financing) is an arrangement where the seller provides a loan to the buyer instead of the buyer obtaining a bank mortgage. The buyer makes monthly payments to the seller, who holds a note secured by the property. Terms including interest rate, amortization period, and balloon date are negotiated between the parties. Seller financing is common with commercial properties, land, and deals involving motivated sellers. Benefits include no bank qualifying, flexible terms, and faster closings. Risks include potentially higher interest rates and balloon payments that require refinancing later.
Related Terms
Creative Financing
Non-traditional methods of financing a real estate purchase, such as seller financing or subject-to deals.
Subject To
Acquiring a property by taking over the existing mortgage payments without formally assuming the loan.
Subordinate Financing
A second or lower-priority loan taken in addition to the primary mortgage.
Interest Rate
The percentage charged by a lender for borrowing money, applied to the outstanding loan balance.
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