A purchase arrangement where the seller acts as the lender, providing financing directly to the buyer instead of the buyer going through a bank.
Full Definition
In owner financing (also called seller financing), the property seller provides the loan to the buyer. Instead of paying a bank, the buyer makes monthly payments directly to the seller under a promissory note and deed of trust. Terms are negotiated between buyer and seller — interest rate, term, down payment, and repayment structure. Owner financing is common for properties that don't qualify for conventional financing, buyers with credit challenges, or sellers who want ongoing income from the sale. Risks include the seller's exposure if the buyer defaults and the complexity of enforcing a private loan. Many owner-financed loans include a 'balloon payment' requiring the buyer to refinance within 3–10 years.
Related Terms
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