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Owner Financing

If you're looking to buy a house, sell a house, or just interested in real estate, you must have come across the term owner financing€™. But what does it really mean? How does it work and what are the benefits? Read more to find out.

When all or the portion of a purchase price, less the buyer's down payment, is carried by the seller, the seller is providing owner financing. Instead of going to the bank, the buyer gives a financing instrument to the seller as evidence of the loan and makes payments to the seller.

If the property is free and clear, meaning the seller has clear title without any loans, the seller might agree to carry all the financing. In that case the buyer and seller agree upon an interest rate, monthly payment amount and term of the loan, and the buyer pays the seller for the seller's equity on an installment basis. The security instrument is generally recorded in the public records, which protects both parties.

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