When financing a home as a buyer or selling you home, there are many financing options to be aware of. Seller financing allows the seller of the home to finance the home for the seller, usually as a secondary choice to a mortgage, but not always. But is it a good idea to do seller financing? Here are some of the pros and cons for both the seller and the buyer in seller financing.
Pros:
- Seller: The seller may be able to turn this into a source of income for them. They can sell a home with interest, and the money comes to them and can act as a source of income.
- Buyer: A buyer will benefit from being able to purchase a home, especially if they were not otherwise approved for a mortgage. This means they can have one-on-one financing with their lender, and hopefully they can make a deal that is optimal for them, and refinance later.
Cons:
- Seller: There is a fair bit of risk associated with it. If your buyer fails to uphold their end of the contract. While there are going to be stipulations in the contract about what to do in this situation, you as a buyer may not readily have the cash that you need right then. This could lead to problems, such as foreclosure, if you have a mortgage to pay for.
- Buyer: Seller financing may come with a high interest rate, usually higher than a traditional mortgage.
Looking at the pros and cons of seller financing may help you decide if it is right for you, whether you are a seller or a buyer. Make sure to be aware of all these pros and cons before getting into seller financing.
