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Do land contracts amortize?

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Hi, I'm trying to buy a house on a land contract.  The seller is amenable to the idea but there are things about land contracts that we don't understand. 

The main thing I need to know is whether the land contract amortizes.  Does each payment permanently decrease the amount that I owe him? 

In other words, will the sum of my payments be subtracted from the current purchase price when I get a traditional loan in a few years?  This doesn't represent our actual figures, but let's say that we lock in the price of $100,000 and I pay $500 a month for 3 years before getting a traditional mortgage.  At the end of the term, would I only owe him $82,000 or would I still owe $100,000?

I'd also like to know how the down payment figures into this.  How are down payments to sellers treated in land contract deals?  Would it lower the mortgaged amount even further, like in a traditional sale?  Also, would I need a separate down payment in 3 years when I get a traditional refinance loan?

I know that there are a lot of savvy people here...I hope someone will "clue me in" so I can know how to structure the deal.  Thanks!

Welcome to the REI Club. 

It really depends on how willing the Owner is to work with you.  The land contract  aka Contract for Deed can reflect an interest rate and term or it can reflect just a payoff amount

Think of it as an IOU with restrictions.

Deposits and their handling is again based on what the landlord wants.  If you search the web for land contracts you will get a little better understanding of the variations.

Guidelines may vary from state to state.

With your degree of knowledge about the subject I could write you a whole book on it. But why, there's a free one this site called Owner Will Carry. Better yet both parties should seek the help of a lawyer. 99.9% are amortised. Herbster

The freebie book that Herbster mentions can be found here:

Rob in Atlanta:
Amortizing a land contract is a function of adding a provision in your contract.  In the past, I've attached an amortization schedule at an agreed interest rate to show the amount of equity build up in each payment over the term of the contract.  The amortization schedule is actually made as part of the contract.  This can be done in your negotiations.

I would be cautious however, in that when you resell with a land contract (or contract for deed) and there is a default at hand, many of the judges in court do not like these contracts.....I would go as far as saying they have 'attitudes' towards these contracts, and I have seen favor given to the tenant/buyer.  Learned that the hard way!  I, no longer, use land contracts and have not in over 15 years.

Hope that helps.



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