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.
Your Room opens on showings and offers, with everything before the listing already ticked.
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See how it worksWhere this comes up: on the market
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
In your Room, this word explains itself where it appears.
Your Room defines seller financing in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
Organize my saleFree to set up. Pay once when you list: $89 or $189. 7-day refund.