Interest rate help! Owner financing property?

Question

The owner is willing to finance 100% on a $200,000 property.

If he were to refinance at at 6% (ideally) his payment would be around $1,200 a month.Now lets just say he also charges me 6% on his loan (interest for him) does that mean i would owe him $2,400 a month? ( 1,200 in interest and 1,200 for his mortgage payment) ? would 6% be a fair rate to him? or does the rate usually tend to be less in this type of deal (such as lower then 6%) any help would be appreciated.I'd like to know the details before i propose such a deal,and or contact a real estate attorney to draw it all up for us in aggreement.

Answer 1

be very very cautious!!

what this sounds like is a "wrap around" "loan". If the "owner" gets a refi loan , that loan is secured by the property. Should he sell said property to you, he would have to pay the loan off. If he does not, then in effect, he is collecting from you and paying his loan with that money. (wrap around)... What if he collects from you and does not pay his loan? You would be in big big trouble. I would RUN--not walk--to a real estate attorney, who may very well tell you this is not legal. Whatever the terms are, it sounds very very risky for you as you describe it here. Sounds like the owner may be trying to pull a fast one. Oh, and a legit owner financing usually carries a higher-than-normal rate, but you save in junk fees and lower (usually) qualifying criteria. And a legit owner-carry will not prohibit the buyer from getting a better loan from somewhere else in the future. Good luck.