Intrest rate

[triplem00]

I am selling a house , Owner Finance on a wrap.
Buyer has no credit history . He has a down payment of 5000.00. What would be a fair intrest rate to charge in texas. (Bell County)   :D

[neodemes]

This might be of *interest*  

http://www.mortgageloan.com/Rates/Texas/

Google "current interest rates in Texas" for more results

hth

[tedjr]

I used to get 10 to 12% on my contract for deed sales. I would charge 12% with little down and 10% if they put down $5000. What is the purchase price? If it is a million dollar home $5000 down is not a lot. If it is $50,000 then $5000 is a lot to put down. Even a $100,000 home is a fair amount down and you would have less risk. I would try to not be too greedy and in today's market 8% owner finance rate would be about right. Maybe even 9% but not  much more.  The rate you are paying also has a bearing on what you have to charge too. If you are paying 10% you may need to get that much too. If you ask too much you can always come down a point but hard to go up a point.

Hope this helps some.

Good luck and thank you,
Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas  78737
512-301-9171 home
512-587-6177 mobile

[triplem00]

Thanks for the info. , I wanted to make sure, I asked a fair  intrest rate. :D              Have a wonderful day.

[David Alexander]

When owner financing You typically set the rate....

It usually depends on  the market....

For Instance.... 2 years ago....  we owner financed property at an average of 10.5%

for 30 years....

Lately.... Most of the Notes we've been carrying have been  starting at a maximum of 8.5%.....  so, that we can get the people in...  Then we graduate it yearly....

9.5, 10.5, 11.5... for the remaining balance......

It also, depends on price range of the houses....

Lower end houses can carry a higher interest rate easier...

And it depends on the exit strategy...

Do you want them to refi... do you want them to be long term... are you going to sell the note.....

David Alexander

[neodemes]

Lately.... Most of the Notes we've been carrying have been  starting at a maximum of 8.5%.....  so, that we can get the people in...  Then we graduate it yearly....

9.5, 10.5, 11.5... for the remaining balance......

I have been staring at the screen trying to figure out a tactful way to ask....What kind of idiot challanged individual would agree to a graduating mortgage, rather than a reasonable fixed rate?

[David Alexander]

When  your owner financing....

They don't agree to it....  that's the way it is....

What I have found is... that if I don't... then the people will pay me forever....

We'll when you have large equities tied up in property.... 50k and greater...  You start to understand Return on Equity... could my money be working harder....

So, if your not going to get your money to put it back to work then you need... to make it work harder... at a rate you be ok with it working....

Most people as well are very optimistic about there future.... and if they can just get into a house... they'll worry about it later.... so, you make it easy for them to get in....  and they know going in... hey in a few years... I'll refi.... or we'll more....

It's not about being dumb....

If they go get a mortgage that's ok too....

Not all of them can... Not all of them want to..... and you shouldnt running a business financing houses at what they want... you do what will work for all.....

David Alexander

[neodemes]

It's not about being dumb....

IMHO: You're right, to hook up to that kind of financing would require a mixture of ignorance and desperation.

[David Alexander]

Has nothing to do with ignorance or desperation.....

Do people go to a used car lot and pay 14% because they are ignorant...

Nope... Sometimes... they choose to....

They can't get other financing.... Bad Credit,  Self employed, don't trust banks...

On the otherhand you'd be ignorant not to finance the properties... where you get paid well.... Your taking the risk......

David Alexander

[neodemes]

Maybe I'm misunderstanding something or not making myself clear.

If I were going to buy a car, let's even say my credit really stank, and I had to go 21%...I would still take the option of 21% for the full 5 yrs not 21% first year and a point more every year. Whether the car lot guy was trying to get the biggest bang for HIS buck, or wanted to encourage a refi with someone else later on and get cashed out is of no concern to me. The car lot guy that offered me a graduated interest rate would get one thing from me...a good look at my keester walking out the door.

[David Alexander]

Not if the car lot guy.....

Started out at 17%, 18%, 19% 20% and for the remaining balance 21%...

You see, you don't make the money on the interest....  You make it on the spread and the fact that you bought at a discount....

When everyone else is still offering 9 - 10% and selling with Owner Financing... You have to zig....  so your ads might say Owner Financing 7%.... They call... You say we'll give you 7% with 10%.... How much you working with...  I only have 5% to put down... What if I could get you in at 8.5%....   They like the house...  You talk to them and say I can get you in.... and we don't put any ballons in our financing or prepayment penalties like most... But, here what we do have to do...

We'll get you at 8.5% for Year 1.... Year 2 - 5 it goes up 1% and stops in year five for the remaining balance...  You can always refi us anytime... but, you don't ahve to....

Now, if it were you and you showed me your keister..... I would have never been having the conversation with you in the first place....

If you think it's wrong... then you havent been on the other side of financing....

Your taking a risk... What if they default... What if they file bankruptcy...  What if they trash your house.... What if the market goes down....  

On the otherside....

They get homeownership.... with a low down....  No prepayment penalties, no balloons, all the appreciation, tax write offs, And NO BANKS or long red tape...

David Alexander

[neodemes]

Now, if it were you and you showed me your keister..... I would have never been having the conversation with you in the first place....

Hey...my keister isn't so bad, I just like to take it with me when I leave.

Which I would do, to find all the things you describe from another lender except for an interest rate that graduates. A little math would show me that, even if I got in at slightly higher than your loss leader rate, by the end of term I would have saved.

I understand you want to make $ and you will with your method...it makes good business sense for you.

However, you won't be making it from those that do their homework and shop around. Maybe you are the best deal in your area...I dunno....but in general, you have competiton willing to OF with a fixed rate and other favorable terms.

IMHO, of course.

Hey, its been fun.  

[David Alexander]

If I'm offering to owenr finance at 8.5% to start with a low down and NO Qualifying..... That pretty much makes me the best game in town....

Once someone wants a house... it's just a matter of making it work...

Not sure where your at... But, our economy is trashed here here in Texas.....

You may think, I'm being unfare... But as an investor... You make your money upfront... In the middle and on the back end...

Well... here in Texas.... It ain't like that right now....  Our Taxes and insurance run about 3 - 4% of a property..... That'll kill cashflow..... (the middle) meaning a 7% loan is like a 10 -11% at the start.....  At the same time.... there is plenty of property....  But, everyone else is doing a L/O....

So, instead I completely owner finance.....  If I can... (they have enough down)

Now, to make money in this market..... You either buy really cheap.... and Hold... wait it out.... or do what I do.... make it so they "Will cash you out" So, your equity isnt tied up with a poor return...

I've even offered some incentives like.... No Payments, No Interest for 90 days.....
With 20% down...

But, go ahead and charge only 6, 7, 8% and watch the negative cashflow.... or charge 9 - 12% and watch the property set....

Two years ago... my average interest rate was a fixed 10.5%....   I would never do that fixed thing again... They have No Incentive to cash you out....

Cash To Asset To Cash.... Rinse and Repeat....

David Alexander

[neodemes]

I do understand where you are coming from, its just that...aw, never mind.  :  

Hey, good answer to Heather regarding "doing what you love"  

Peace, Brother

[David Alexander]

Naw... nevermind... don't let me off the hook.....

Hit me between the eyes....