Types of Owner Financing Arrangements

Do you know the different types of owner financing agreements? If you’re thinking about buying or selling a house with owner financing, make sure you read this blog post because this information will make a huge difference in how much you pay and how long.

Owner Financing… For Buyers

it’s a powerful way to acquire property without having to go to a bank, and perhaps even to get more favorable terms than you’d get at a bank.

That’s because the seller is the one who finances the purchase of the house… selling the house and accepting a down payment and regular mortgage payments until the house is paid in full.

There are different types of owner financing arrangements but here’s the most important thing to know: everything is negotiable. When you find a seller who is willing to do an owner financing arrangement, it’s just a matter of bringing together the right components into the agreement to make it a win/win.

Owner Financing… For Sellers

The big advantage for the sellers is they have created an annuity… periodic income, usually monthly for some time in the future. Additionally, they minimize their federal income tax liability by spreading it out over several years.


An important consideration when considering the types of owner financing arrangements is who will own the property during the owner financing period. If the title passes to the buyer at the sale, then the buyer gives the lenders a mortgage or deed of trust as collateral for the loan. If the seller keeps the title and the borrowers get title when the loan is paid off, the transaction will be either an Agreement for deed or a land contract.

Purchase Price

Of course, the purchase price of the house is up for negotiation. Sometimes the seller might agree to a lower purchase price. Or if the sale is under an agreement for deed or land contract and you are the buyer, it might be in your interest to negotiate a purchase price today that is attractive when you finally own the house outright in a few years.

Down Payment

The seller may want a down payment on the front end of the financing, maybe because they need some money, or they want to see that you’re serious. The buyer may want to pay a down payment to reduce the size of the overall financing agreement, or the buyer may want to minimize the size of the down payment.

Sometimes sellers will want money on the back end of the agreement, by creating a shorter repayment period with a final ballon payment.

Figure out what works for both of you and work with that.


One of the biggest factors of owner financing arrangements is how long the agreement will be in force – in other words, how long will it take you to pay off the financing? Higher payments usually mean paying off the financing faster, while ultimately paying less interest.

However, lower payments spread out over a longer period of time might raise the overall price of the house but will also be more manageable for the buyer.

Interest Rate

Another big factor in owner financing arrangements is how much interest will be paid on the loan, and how that interest is calculated. A simple interest rate of 7% added to your financing is very different than an annual compounding interest rate of 7%. Make sure you understand the interest rate terms very carefully!


There are other considerations about different types of owner financing arrangements, but you’ll find that these are the main negotiating points in most situations.

Want to learn more about owner financing, Click here now and fill out the form, or call our office at (772) 232-2383.

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