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I was looking through some ads on a real estate site and came across a house for sale with these terms - "Owner Carry terms only! 20% down, 6% interest amortized over 30 years with a 20 year balloon."
Why on earth would anybody buy a house with those terms??
I was looking through some ads on a real estate site and came across a house for sale with these terms - "Owner Carry terms only! 20% down, 6% interest amortized over 30 years with a 20 year balloon."
Why on earth would anybody buy a house with those terms??
The person can not get credit anywhere else(likely)
The property is cheap enough that it makes up for the higher interst rate.
There is no(or little) prepayment penalty and the person buying plans to buy and refi out of the owner carry loan right away.
An investor owns the home and will sell it only if they can finance it. They are making their money off interest. If the buyer defaulrs, they keep the 20 percent dn plus the pmts.
It's actually not a bad deal for a buyer with credit issues that couldn't otherwise getvfinanced. I remember when decent interest rates were around 8 percent. And I'm not that old. 6 percent us a steal for v owner finance. Most hard money lenders here are around 10 percent.
Interesting. Well, I hope he eventually sells it then, but it won't be to us. Lol Not unless rates go way up before we're ready to move and he doesn't change his rate, which is unlikely. Then again, I didn't particularly like the house anyway, so no skin off my nose.
An investor owns the home and will sell it only if they can finance it. They are making their money off interest. If the buyer defaulrs, they keep the 20 percent dn plus the pmts.
It's actually not a bad deal for a buyer with credit issues that couldn't otherwise getvfinanced. I remember when decent interest rates were around 8 percent. And I'm not that old. 6 percent us a steal for v owner finance. Most hard money lenders here are around 10 percent.
Hard money is not relevent here. Hard money is mostly used for distressed property purchased at a big enough discount.that justicies.the.high carrying costs.
The correct.comparison is to fha. If the property is cheap this might be an ok deal, if its market value it's a bad one, unless you can refi out in the short.term without a big.prepayment penalty
Hard money is not relevent here. Hard money is mostly used for distressed property purchased at a big enough discount.that justicies.the.high carrying costs.
The correct.comparison is to fha. If the property is cheap this might be an ok deal, if its market value it's a bad one, unless you can refi out in the short.term without a big.prepayment penalty
It looks like market value for the area, judging from the pictures and the sales site I was on, without actually seeing the house. I have the house 'favorited' for future reference just for my own nosiness to see if it ever sells, not that it will tell me at what terms of course, but I'm curious by nature.
Hard money lenders here will help investors buying distressed properties or homes that don't qualify for conventional, fha, or va loans, AND THEY lend to buyers that can't qualify for any regular mortgage.
My dh and I own some homes that we rent out, and we're going to sell a few of them using similar to the op's but with a little higher rate. No credit ck needed, but ours had a 7 yr balloon amortized over 30 yrs.. It's a good option for people with bad credit but that have saved a dn pmt. It's a win win for buyer and seller.
People that can get a mortgage thru regular lenders will not be buying these homes. And we would not have wanted to sell the homes to people using traditional lenders, because the financing of them is what we were making our money on (interest). And the interest is high because of the enormous risk we were taking, by financing someone who either had no credit, no job stability, self employed or really bad credit. If they trashed the place and stopped paying, the dn pmt and interest collected is what is used to bring the property back to original condition.
I suppose that makes sense. Especially if you don't NEED to sell them. I hadn't thought of that. You can continue renting them until the right buyer comes along. Thank you for explaining it.
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