An owner financing contract is an agreement between the owner or seller of the property and the buyer. The seller agrees to finance the balance of the purchase price (not including the down payment) with the buyer making payments to the seller. Use this owner financing contract template for any purchase where financing is necessary.
This agreement is entered into on [Document.CreatedDate] between [Owner.FirstName] [Owner.LastName] (hereinafter “Owner”) and
[Buyer.FirstName] [Buyer.LastName] (hereinafter “Buyer”) for the sale of the property located at [Property.StreetAddress] , [Property.City] , [Property.State] [Property.PostalCode] (hereinafter “Property”).
At all times the laws of [Property.State] in which the Property is located will govern this contract. This contract does not constitute a sale contract for the Property. A separate sale contract for the Property must be entered into and executed according to the laws of [Property.State] in which the property is located.
An owner financing contract does not count as an agreement of purchase and sale but is an additional document used solely for owner financing. It could be attached to a purchase and sale agreement.
This contract establishes that, in connection with the Owner selling and the Buyer purchasing the Property, the Owner shall finance the balance of the purchase price for the Property for the Buyer after the Buyer delivers the agreed upon down payment of $__________________ (hereinafter "down payment").
The down payment amount is to be delivered no later than __________________________, 20_____. Failure on the Buyer's part to provide this down payment to the Owner nullifies this contract in its entirety.
The total purchase price of the Property is $__________________, as agreed to by the Parties to this contract.
The Buyer is/is not (choose one, delete the other) obtaining financing for a portion of the purchase price of the Property from a third party, such as a bank. The Buyer must notify the Owner of any amount of financing obtained from any third party and provide the full name and contact information of the third party within 30 days of obtaining any such financing.
The amount that the Owner will finance for the Buyer for the sale of the property is
$_____________________ (hereinafter “Owner finance”). The Owner shall carry the promissory note for the entire mortgage term of _____________________, expiring on the ______ day of ___________________, 20____ for the amount identified as Owner finance.
The Buyer has submitted a mortgage application to obtain this financing and the Owner has approved the Buyer’s finances.
The financing for the mortgage is to carry an interest rate of ________________. This interest rate is/is not (choose one, delete the other) flexible according to the mortgage rate index chosen by the parties. The Owner and the Buyer have agreed upon ______________________ as the mortgage rate index to govern this contract. Any changes to the interest rate can only be made by the Owner, but must be provided in writing no less than ________ days prior to the change coming into effect.
There are many different ways to structure a mortgage, e.g., flexible mortgage (monthly payment flexibility), payment period, fixed or variable interest rates, etc. These details should be included in an owner financing agreement.
Payment for the mortgage is due monthly/biweekly (choose one, delete the other) in the amount of _________________________. This amount does/does not (choose one, delete the other) include insurance, taxes, and state, legal, and other fees associated with owning the property. Should this mortgage amount include these fees and should these fees change at any point due to changes in rates being set by the governing party, such as the state tax authority or insurer, the parties will notify each other of any changes that are brought to their attention within 30 days.
Prepayment of all or a portion of the financing extended to the Buyer is allowed and carries no penalties/carries a penalty of ___________________ (choose one, delete the other).
Many mortgages have annual prepayment options up to a certain percentage of the total amount owing and if prepayment over that amount is made, then fees kick in. There are many different options to structure prepayments.
This agreement is secured by the property. The Buyer’s failure to pay the mortgage payment when due as described in the terms of this agreement entitles the Owner to initiate foreclosure proceedings as allowed by [Property.State] against the Buyer. The Owner has the right to repossess the property after the conclusion of foreclosure proceedings, as outlined and permitted by the laws of [Property.State] .