Seller financing
The seller acts as the bank and carries the loan for the buyer. The buyer makes monthly payments to the seller. Terms are whatever both sides agree to.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
Carrying the loan yourself can sell a home a bank will not lend on, and it turns your equity into monthly income instead of a lump sum. It also makes you the lender, with the lender's paperwork and the lender's risk.
Part 2 of 4
A simple example
You own the home free and clear and sell for $200,000 with $30,000 down, carrying $170,000 at 6.5% over 20 years.
| What happens | What follows |
|---|---|
| The buyer pays every month for 20 years | About $1,267 a month to you, and the deed already passed at closing |
| The buyer refinances in year four | You are paid the balance at once |
| The buyer stops paying | You foreclose under your mortgage, as a bank would, with a lawyer |
Seller financing is a sale plus a loan. The sale is done in a day; the loan is yours for years.
Part 3 of 4
What people get wrong
That it is a handshake arrangement. A note, a mortgage, an attorney and, in many cases, federal lending rules all apply.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
One piece of your sale. Here is where all the pieces live.
In your room, this word explains itself where it appears.
Keighbor keeps your whole home sale in one place and defines every term like this one right where you meet it, in the step you're on. Free to set up, with or without an agent.