aka Owner Financing
This is self explanatory: instead of the buyer getting a loan from the bank or other non-bank external lenders, we would instead lend the prospective homebuyer the money for the purchase (allowing instalment payments over several months/years). We would execute a promissory note with the buyer providing an interest rate, repayment schedule and consequences of default. The buyer sends his monthly 'mortgage payments' to us directly - Who wants to deal with a third party when you don't have to?
This unconventional option comes in handy for potential homebuyers who don't qualify for (or don't want) a traditional home mortgage or do not see our rent to buy option as a good alternative. This arrangement is for a short term, such as five years, with a balloon payment due at the end, with an in-built switch to a traditional mortgage or rent to own or can be kept as it is with full repayment by end of 60 months.
• The seller is also the lender in a seller-financed transaction: But the seller(Us) doesn't just hand over money to the buyer(You) in the form of a loan as banks and mortgage lenders do. In this scenario, we allow the buyer make payments instead. For example, assuming a home is listed on the market for ghs45,000, we may agree for a seller financing deal transaction at a price of ghs50,000 and the homebuyer will make 60 monthly payments of ghs833.33.
• Required down payment is usually around 10% of the property price.
• The loan is secured by the home which can still be foreclosed if the buyer defaults, over a period.
Types of Seller Financing Arrangements
1. All-inclusive mortgage
In an all-inclusive mortgage or all-inclusive trust deed, the seller carries the promissory note and mortgage for the entire balance of the home price, less any down payment.
2. Land contract
Land contracts don't pass title to the buyer, but give the buyer "equitable title," a temporarily shared ownership. The buyer makes payments to the seller and, after the final payment, the buyer gets the deed.
The seller leases the property to the buyer for a contracted term, like an ordinary rental -- except that the seller also agrees, in return for an upfront fee, to sell the property to the buyer within some specified time in the future, at agreed-upon terms (possibly including price). Some or all of the rental payments can be credited against the purchase price. Numerous variations exist on lease options.
4. Assumable mortgage
Assumable mortgages allow the buyer to take the seller's place on the existing mortgage. Some loans, as well as conventional adjustable mortgage rate (ARM) loans, are assumable -- with the bank's approval.