Seller carryback financing is not in competition with conventional financing. Seller carryback financing works in EVERY state.

So, your property is on the market at present and an expert has suggested that you should consider carrying a second mortgage/trust deed to facilitate the sale of your house. You have heard the words "seller carry back" but, don’t understand the full implications. Who determines the interest rate, who collects the payments, what happens if the people stop making payments?

The question of determining interest rate is quite simple. This is a factor of down payment and credit. If the buyer has 5% down and terrible credit, the transaction is risky. If the buyer has 20% down and great credit they probably wouldn't even need a seller carry back. The next question is how long has the property been on the market and how motivated you are to sell your home? In many areas of the country the seller needs to consider a seller carry back in order to sell the property. Often the seller can achieve a higher sale price by offering a seller carry back.

The interest rate on the carry back is determined by the buyer and seller. The buyer obviously would prefer to get 5% interest rate for 30-years; the seller usually wants 10 to 15% for 2-years. The typical seller carry back is around be 8%-12% with a period of 5-7 years. If this is a second mortgage most first mortgage holders will require a minimum of a 5-year term

Payments on your carry back mortgage can be mailed directly to your address, but this may not be a good idea. In the last 10-15 years, loan servicing has become very tricky with requirements for the lender to report interest paid by the borrower on both Federal and State tax forms.

Also, late fee notifications, first mortgage delinquencies make this an area that should probably be handled by a professional. It is important in the typical seller carry back to be firm on the collection of monthly payments and be prepared to institute foreclosure proceedings quickly if necessary.

The typical seller carry back situation is 10% down, 10% seller carry back and 80% first mortgage. Obviously, this is a percentage of the purchase price. To make it simple, a $200,000 house would have a $20,000 down payment, a $20,000 seller carry back and a $160,000 conventional first mortgage deed.

Such  loans are usually fixed mortgage rate with payments based on a 30-year fixed amortization but due and payable in 5 to 7-years.

Seller Carryback Financing Works When: