Other Financing Options When Buying Florida Real Estate
In today’s real estate market, buyers and sellers are trying to find new ways to make deals come together, and private financing is becoming a bigger part of the picture. In fact seeing the seller helping the buyer finance the home is becoming more common, and buyers are turning to other non-traditional lending options as well. These tools can absolutely help get a deal to the finish line—but beware if its not done correctly it can get messy. Thats why it’s important to get professional help from a real estate attorney to make sure that the agreement is carefully drafted and to make sure everyone is protected.
What Does “Private Financing” Mean?
Private financing simply means borrowing money from someone other than a bank or traditional mortgage lender. That could be:
The seller (often called seller or owner financing)
A family member, friend, or private investor
A hard money lender (usually short-term with higher rates)
Seller financing is especially common when the seller owns the property outright or when buyers don’t quite fit the box for a traditional mortgage. It gives both sides flexibility on terms and can help keep a deal moving forward when a bank loan isn’t an option.
How Seller Financing Works
In this type of deal, the seller acts like the bank. The buyer makes monthly payments directly to the seller, based on an agreement that usually includes a promissory note secured by a mortgage on the property. Together, the buyer and seller decide the interest rate, the payment schedule, and whether there will be a balloon payment at the end.... The most important step? Putting everything in writing and properly recording the mortgage so there are no surprises later.
Things to Watch Out For
While private financing has its advantages, there are some rules and risks to be aware of:
Dodd-Frank Act: If the buyer is purchasing a primary residence, special rules apply. In many cases, the loan must go through a licensed mortgage loan originator unless the deal qualifies for an exemption.
Existing Mortgages: If the seller still has a mortgage, their lender may require the full balance to be paid off if the property is sold. This can complicate things if not handled up front.
Interest Rates: Florida sets limits—generally 18% for loans under $500,000 and 25% for larger loans. Going above these limits can lead to serious consequences.
Title and Recording: A clean title and properly recorded mortgage are essential to protect both sides, especially if the buyer defaults.
The Bottom Line
Private financing can be a creative option in today’s market, but it’s not something to navigate alone. Having a real estate attorney involved from the start helps ensure the deal is structured correctly and protects everyone’s interests.
