Seller Financing Ideal for Short Term Mortgage Notes |
| It’s easy to think of the real estate market as something focused on long term commitments, and in many cases that’s practical for buyers interested in settling down in a home or using a commercial building as a decades-long investment, but the last housing bubble has made people think twice about carrying a mortgage from one economic era to the next. How do you know you’re not going to stumble into trends that damage your property’s value? |
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Seller held mortgage notes are well known solutions. A properly crafted seller financed note meets the needs of both buyer and seller. Many sellers prefer a shorter amortization than would be used in a comparable mortgage note, deed of trust or other land contract. This fits buyers who want to “get the job done” – take possession, make payments, and clear the loan as soon as possible. A typical seller financed note might conclude a five year term with a balloon payment.
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| Short term seller held notes with balloon payments are ideal for people who are just entering into a savings cycle in their earning histories. They’ve just entered the professional, career focused phase of their lives, and while they’re confident in their ability to cover the cost of a home or other property, they want to avoid feeling the squeeze of short term amortization until they’re more established. On a balloon note, the remainder of the loan is due at the end of the term. They buyer knows this well in advance and is ready to take care of it.
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Like any seller held note, it’s up to the seller/lender to offer that short term note – especially one that ends in a balloon payment – to a borrower that actually fits a profile like the one above. You must be confident that the borrower is capable or meeting the balloon payment along with standard payments across the note’s term. Thoroughly investigating the buyer’s borrowing credentials with the help of real estate professionals, particularly a real estate lawyer.
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| It’s important not to confuse short term notes with balloon payments with the type of mortgages issues during the housing bubble. The intent of the balloon is simply to balance out payments in a fashion that makes the shorter term desirable to all parties. It isn’t used to offer a “teaser rate” on other payments. Most importantly, the seller knows the borrower’s credit details and fully informed the buyer of the ramifications of the loan.
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| If you follow these guidelines, you’ll craft a mortgage note you can rely on as an investment. Better yet, we can convert well-managed mortgage notes into cash flow at competitive rates. If you need an influx of cash or just want to simplify your investments, you can contact us buy your note. Contact us for a free mortgage note quote to take a look at the possibilities. |
