Seller carry back financing is an arrangement which surprisingly few people outside of the investment world are aware, despite the many benefits it offers to those who utilize it. This is an arrangement usually made between a buyer and a seller when the buyer is having a bit of trouble obtaining the full amount of money required for a purchase, usually a house. If the house in question is completely paid off, an investor has the option to carry-back a mortgage for an agreed-upon specific period of time. During this time, the buyer makes payments to the seller on a monthly basis until the mortgage is paid off within a set period of time or until the buyer in question is able to obtain proper financial support from a bank or other lending company.
Seller carry back financing is particularly beneficial to the sellers or investors involved in the agreement. Because this party is essentially allowing the buyer to borrow their own hard-earned money in lieu of going to a bank or investment firm, they are able to charge much higher rates than these other institutions, which increases profits a great deal over the agreed-upon period of time. Essentially, this investment provides a monthly source of extra income straight to an investor’s mailbox.
Furthermore, this arrangement has built-in securities which make it preferable for investors everywhere. If the buyer defaults on their payments or generally does not uphold their end of the agreement, the mortgage is still technically in the name of the seller, and therefore this party has the assurance of the value of the home or property if the deal falls through. They can then attempt to set up another similar arrangement or to sell the house on the market to add to the profit they’d already made. If the investor finds that they need their money immediately to cover emergency costs or other unforeseen expenses, they have the option to purchase the mortgage and sell the home, which can under the right circumstances produce a great deal of cash.
Overall, seller carry back financing is an excellent strategy. The arrangement is a very lucrative one, and can assure sellers young and old that the risks associated with the real estate market have been reduced, and can even offer the investors a benefit if they play their cards right. This investment strategy can be a perfect money maker for professionals and new investors alike, and should be something that anyone looking to invest in a property should consider