In some instances, a person selling a property may decide to offer owner financing, rather than have the buyer obtain a loan from a commercial lender. This may occur when the seller wants a quick transaction, or wants to create a steady stream of income. The property itself may not conform to bank terms, thereby not qualifying for bank financing. In some cases, the person purchasing may not qualify for a commercial mortgage.

No matter what the reason for owner financing, promissory notes are still highly recommended to document the loan. Promissory note forms for owner financing sellers can be found via software or form books. Should the person financing the loan change his mind about receiving monthly payments, he can always sell the document to real estate note buyers for instant cash.

Repayment Terms with Owner Financing

Choosing repayment terms is one of the most important steps in negotiating a loan. One common choice that we find in most car loans and home mortgages is an amortized payment plan. Amortized payments are equal monthly installments that go toward interest and principal. Depending on the amount the buyer can pay per month, he or she may be paying the loan for several months to several years.

Some people choose to make a single payment at some specified time in the future. Others decide they want to make monthly payments for a while and then pay off the remainder in one final balloon payment. The initial payments can calculate in interest and principal or just interest. However, if one is paying just interest in the initial payments, he will pay more interest in the long run because he is borrowing more principal for a longer period of time.