Q: What Is Seller Financing?

A: Also known as a purchase money mortgage, it is when the seller agrees to “lend” money to the buyer to purchase and close on the seller’s home. Usually sellers do this when money is tight, interest rates are high or when a buyer has difficulty qualifying for a conventional loan or meeting the purchase price.

Seller financing differs from a traditional loan because the seller does not actually give the buyer cash to complete the purchase, as does the lender.  Instead, it involves issuing a credit against the purchase price of the home.  The buyer executes a promissory note or trust deed in the seller’s favor.

The seller may take back a second note or finance the entire purchase if he owns the home free and clear.

The buyer makes a sizeable down payment and agrees to pay the seller directly every month.

The interest rate on a purchase money note is negotiable, as are the other terms in a seller-financed transaction, and is generally influenced by current Treasury bill and certificate of deposit rates. The rate may be higher than those on conventional loans, and the length of the loan shorter, anywhere from five to 15 years.

 

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Reprinted with permission from RISMedia. ©2015. All rights reserved.

How to Engineer Your Financial Future in 2014

Financial resolutions can be the most difficult to keep. They can include minute detail, number crunching, plenty of files and discipline that can affect a person’s entire lifestyle, says veteran investment advisor Paul Taylor, a member of the National Ethics Bureau.

“Many folks simply are not predisposed to combing through the details of their financial situation; for them, the financial world is abstract and filled with arbitrary rules, constantly changing interest rates and other complexities, but being more involved in your own money is well worth the investment,” says Taylor, an architect-turned-founder and owner of Capital Advisory Group & Tax Planners of Lake Norman and Capital Investment Advisors, Inc, (www.CapitalAdvGroup.com).

“While professional help is recommended for many aspects of a person’s financial affairs, it’s ultimately up to the individual to understand his or her own money.”

There are many things the average person can do to take control of their financial life. Taylor offers the following suggestions:

• For your cash flow, keep in mind the four A’s: Accounting, Analysis, Allocation and Adjustment. The four A’s describe a systematic and disciplined approach to your daily, weekly, monthly and yearly spending habits. Accounting involves gathering all your relevant financial information – income, recurring bills, and other expenditures – creating a central list of each item, and pulling it together in a place where it’s easily accessible. Analysis is reviewing the information to determine whether you have a shortfall or surplus, and finding places to reduce expenses. Saving $100 a month on dining out, for instance, would allow you to apply $100 to your mortgage loan principle, saving you a substantial amount in interest payments. Allocation involves determining your financial commitments and priorities, needs versus wants, and distributing your income accordingly. Adjustment involves periodic reviews of your financial information and shifting assets to meet changing needs.

• Utilize estate planning tools such as wills and trusts; make sure the details are accurate. Wills and trusts allow you to spell out how you would like your property to be distributed, and much more. A will gives you the opportunity to nominate your executor and guardians for your minor children. If you fail to make such designations through your will, the decisions will probably be left to the courts. Bear in mind that property distributed through your will is subject to probate, which can be a time-consuming and costly process. Trusts, which are more complex, let you customize the distribution of your estate with the added advantages of property management and probate avoidance.

• Start planning your retirement sooner rather than later. There are a variety of retirement planning options that can meet your needs. Your employer funds some; you fund some. Bear in mind that, in most cases, early withdrawals before age 59½ may be subject to a 10 percent federal income tax penalty. The latest date to begin required minimum distributions is usually April 1 of the year after you turn age 70½. Withdrawals from tax-deferred plans are taxed as ordinary income. The top planning options include defined benefit pension; money purchase pension; profit-sharing plan; savings plan; employee stock ownership plan; tax-sheltered annuities; individual retirement accounts; self-employed plans; simplified employee pensions; and savings incentive match plans for employees.

• Remember the first commandment in safe investment: diversification. Virtually every investment has some type of risk associated with it. Don’t put all your eggs in one basket. Diversification is one of the main reasons why mutual funds may be so attractive for both experienced and novice investors. Many non-institutional investors have a limited investment budget and may find it challenging to construct a portfolio that is sufficiently diversified. For a modest initial investment, you can purchase shares in a diversified portfolio of securities. Depending on the objectives of the fund, it may contain a variety of stocks, bonds and cash vehicles, or a combination of them.

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Reprinted with permission from RISMedia. ©2014. All rights reserved.