When selling a home, you may wish to use owner financing so that you can attract more potential buyers and make money on interest. If you choose to go this route, you will have to comply with some rules set forth by the Internal Revenue Service. As long as you follow the rules, it can be a worthy way to generate income.
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Owner financing, also known as seller financing, can take one of many forms. Depending on the arrangement, it could involve you continuing to make your normal mortgage payment then having the buyer pay you back each month. If you own the property without a mortgage on it, you may simply provide the entire mortgage loan for the buyer.
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Whatever the structure, the key feature is that the buyer does not hand over any money when they purchase the property. Instead, the buyer will simply make a mortgage payment to you until the property is paid in full. By doing this, you get the purchase price and interest.
The buyer also benefits as they are able to purchase the property even if they cannot qualify for conventional credit. Both parties also benefit from faster closing.
