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My most recent owner finance arrangement (I am the mortgagee):
- 10% down payment (they have a financial stake in the property)
- interest rate at 7.50% (these borrowers don't have perfect credit)
- amortized at 20 years, with balloon due in 3 years (I can opt to continue or call in their note in 3 years)
This has been an ideal arrangement for me. I sold the property for about 25% more than I could have gotten receiving all cash, and it provides a good retirement income. I did tell them that paying additional principal each year would increase the likelihood of me renewing the note.
I have carried back paper on several home sales. it works if you own it free and clear. I prefer to carry the paper so I make all the money the bank would normally make. I would amortize it for 30 years, due in five with option to renew it after five if necessary. A 61 yr old doesn't want to carry paper for more than five years at a time, pus you don't know what the market will look like in five years.
It's a big benefit for the buyer, and a huge profit maker for the lien holder, in the right circumstances..
The other advantage of carrying paper is you spread to profit out over several years so the tax man doesn't take it all. Lots of good reasons to carry paper if you can, just don't make it a long term deal
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