Your Guide to Seller Financing Options
In real estate transactions, homebuyers have to obtain some kind of financing. Typically, this additional monetary support comes from a third party institution like a bank or mortgage lender. However, sometimes the seller may also offer financing directly. There are many options available depending on the specific need and situation. Here is a basic overview of seller financing you may encounter in your real estate transactions.
All-Inclusive Mortgage
An all-inclusive mortgage is also sometimes called an all-inclusive trust deed or AITD. The seller holds the promissory note for the entire balance of the mortgage. If there is a down payment, that amount is subtracted from the total.
Junior Mortgage
A junior mortgage is financing meant to cover any part of the purchase price that another mortgage lender won’t. For example, many lenders are hesitant to finance over 80% of the home’s price. The seller can cover the remaining 20% by holding a “junior” mortgage on the property and then receive the proceeds from the buyer’s first mortgage. This type of financing can smooth out the sale of the home but leaves the seller at risk if the buyer defaults on their first mortgage.
Land Contract
A land contract concerns the title transfer part of the home selling process. Rather than give the title to the buyer outright, the seller can give the buyer an “equitable title.” This is a form of shared ownership until the buyer pays off the complete purchase amount. Instead of paying mortgage payments for that time period, the buyer pays the seller directly as if paying them rent.
Lease Option
Lease options are also similar to rental agreements but include a written agreement from the seller to sell the property in full by a determined deadline. The seller can “lease” the property to the buyer and give them time to pay toward the balance while also letting them lock in a purchase price. You can compare this type of financing to a typical “rent-to-own” agreement, though there are more specific legal details involved.
Assumable Mortgage
In an assumable mortgage, the seller assumes the place of the buyer in their existing mortgage agreement. This only applies to certain types of mortgages, like some FHA and VA loans. However, it means the seller takes the buyer’s place in the mortgage and assumes financial responsibility per the existing terms.
Few sellers want to take on the risk of seller financing, but these options can be extremely helpful in certain sales and situations. It’s always a good idea to consult a financial advisor or real estate attorney to decide what the best financial strategy is in selling a property.
About the Author
Daniel Martin, Higgins Group Private Brokerage, Licensed in CT, Lic. #RES.6767971
With over two decades of experience in Connecticut real estate, Daniel Martin is a seasoned Realtor at Higgins Group Private Brokerage, renowned for his exceptional market insight and unwavering client dedication. A lifelong Connecticut resident, Daniel's deep roots in the community, coupled with his extensive professional background, provide an invaluable advantage to both buyers and sellers across Fairfield and New Haven Counties.
Daniel's distinguished career is marked by consistent achievement, earning him the prestigious Connecticut Magazine 5 Star Realtor award from 2014 to 2025. He is a perennial Top Producer, recognized as both a Top Listing Agent and Top Selling Agent, a testament to his strategic approach and keen understanding of market dynamics. His expertise spans a broad spectrum of real estate needs, including guiding First Time Home Buyers, navigating transactions for Single and Multi-Family Homes, Land, New Construction, New Residential Developments, Condominiums, Downsizing, and Rentals.
Beyond his impressive track record, Daniel's professional affiliations include memberships with the National Association of REALTORS (NAR), Connecticut Association of REALTORS (CAR), Bridgeport Board of Realtors, Smartmls and Greenwich MLS. His foundational education in real estate from Naugatuck Valley Community College, complemented by studies at Connecticut School of Electronics and Housatonic Community College, underpins his comprehensive understanding of the industry.
Daniel's unique blend of customer service acumen and technological proficiency sets him apart. He leverages every available marketing resource to ensure his clients' homes gain maximum exposure and stand out in the competitive market.
When not orchestrating successful real estate ventures, Daniel cherishes time with his family, including his wife, two children, and four grandchildren. A passionate musician and golf enthusiast, he embodies the vibrant spirit of the Connecticut communities he serves. Daniel's network extends globally, allowing him to facilitate referrals anywhere in the world.
