Borrowing money is not considered the ideal way to manage personal finances. The soundest advice about borrowing is don’t do it.
There is a sound economic borrowing principle: ‘do without until you can afford to pay for it’. Whatever that it is, do not go into debt for it. This is the smartest advice.
For many, such advice sounds great, but this is simply not reality. Unless you are independently wealthy, chances are you will need to occasionally borrow money.
Most of us go into debt for the basic essentials of life. House, vehicle and education loans make up the bulk of personal indebtedness.
Housing and the Economy
Housing is by far our biggest individual expense. It is also one of the banking system’s biggest sources of income.
The same holds true for mortgage companies and closing attorneys. Realtors could not exist without borrowers and buyers. The majority of buyers are also borrowers.
Housing is an important, major industry, and it has many players. It is so influential it is used as a national economic barometer. Housing starts are a direct reflection of the state of any developed economy in the world.
It is also an industry rife with bad actors and corruption. Mortgage lending has practically unlimited potential and opportunity for dishonesty and deception.
The public at large is well aware of this. Increasingly, borrowers are seeking out alternative money sources for purchasing real estate.
What is Owner Financing?
One of the biggest trends away from banks and mortgage companies is owner financing. This is not a new concept. It was practised long before banks ever existed.
Owners dealt directly with buyers who became their borrowers if they did not have the entire amount to pay outright for the house or property.
Guess what. It can still be done, and it is done every day somewhere in the world. Direct selling, without a middle man, is the basic financial concept upon which economies are founded.
Of course, all those players in the established housing industry speak against it. Owner financing does not feed them nor the industry that supports those in it.
Owner financing is a simple transaction. That does not mean that it is free from legal and binding requirements which must be satisfied. It just means you get to pay a lot less in fees and other middleman and partner salaries.
With owner financing, the seller becomes the bank. He draws up the terms. The buyer agrees with a signature and legal recording of the transaction. The deal is completed. No banks have to be involved.
Traditional Financing
Contrast that with traditional mortgage lending through the banks. Try telling the loan officer that the property should stand as the only collateral for your loan.
He will tell you right quick that the bank does not want to get into the landlord business. Never mind that they are in anyway.
They are the holders of the title deed to the property. They just want all the extra collateral they can get. What is ethical about requiring two or three times the collateral value of the house
The bank ‘risk’ is covered in way possible. The borrower has guaranteed the loan. The house must be equal in value to the loan, and insurance companies cover the loss potentialities.
But, of course, that is just not sufficient for most banks. They want to know what you have to put up as collateral in addition to the collateral already in place.
No wonder owner financing is the emerging house finance choice. This can help you with this useful resource.
How Could it Help You With Your Money Situation?
Owner Benefits
Owner financing is of great benefit to both the lender and property owner and to the borrower. The owner gets a buyer that he needs without relying on realtors and paying their fees.
The owner financer is the one with the only right to set the terms for his owner financing. Bank regulations do not enter into the picture, so money is saved there also. The owner, not the bank, gets paid directly by the buyer.
The owner financer, like the bank, holds all the financial cards. The property remains in his name until it is paid off. If the buyer’s default, he gets the property back and goes looking for another suitable buyer.
He also gets to keep all the money the defaulted buyer paid him and any improvements made to the property remain with the property. The defaulted buyer does not get to take them with him.
Less paperwork required, better terms, more flexible agreement, more willing to work with the buyer, etc. the property is the only collateral
Buyer Benefits
Lower Purchase Price
Because of the owner benefits above, the owner is in a position to give the buyer a better price. All the fees banks, realtors and other players would have required to get saved.
The owner can, at his discretion, pass a part or all of these savings to the buyer.
Consequently, the buyer buys the property without the realtor’s markup and other associated fees.
More Favorable Financing Terms
Since the owner is the bank, he is free to set more favorable financing arrangements with the borrower/buyer.
He can split payments, or he can extend the repayment schedule if the borrower cannot make the payments for a while.
The owner can charge lower interest on the loan. With lower payments due to lower interest, the mortgage paid off more quickly.
Less Personal Scrutiny
Owners who finance properties for themselves are not as laden with lending requirements as banks are. They do not demand your life history since the age of two. They do not require your child as collateral or even the family pet.
This means the process is much quicker, and you get the same result without the hassle and personal information invasion.
Improves My Budget
A lower mortgage means more money in your pocket every month. This money can be used to improve your standard of living. It reduces financial strain from other money commitments. It dramatically improves the borrower’s financial outlook.
Value Owner Financing Contributes to Economy
This quicker, easier financing means more home sales. Home sales mean community, town, city, state and national economic vitality. Invested people are committed, people.
They are committed to making the area they live in a better place. Ownership makes that kind of difference.
Conclusion
If you have been looking for a bank alternative for purchasing a house, you owe owner financing a closer look. You could be pleasantly surprised to learn how easy home ownership can be.
