Q: I used owner financing five years ago to purchase my home. The loanA Loan is an amount of money that is lent to a borrower, who agrees to repay it plus interestInterest is money charged for the use of borrowed funds. Usually expressed as an interest rate, it is the percentage of the total loan charged annually for the use of the funds.. had an interest rate of 5.46 percent and was structured as a 15-year mortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. with 20 percent down.
Here’s my question: If I chose to pay off this loan early or sell this house, do I have any equityYour share of ownership in a company. Stockholders are often referred to as equity investors, because they invest in the equity of a company. built up from the payments I’ve been making? Does the owner have to keep the interest part of the payments in separate accounts and if he does not can it be considered that he has comingled the funds?
A: When you bought the property and agreed to owner financing, you and the owner should have set up an amortizationAmortization is a payment plan which enables the borrower to repay his debt gradually through monthly payments of principalPrincipal is the amount of money you borrow if you're getting a home loan. If you're buying a bond, the principal is the amount you're lending. Typically, you'll buy bonds with a face value of ,000. If you buy a ,000 bond, your principal is ,000. and interest. Amortization tables allow you to see exactly how much you would pay each month in interest and how much you repay in principal, depending on the amount of money borrowed at a specific interest rate. table so you and she could see how quickly you were paying off the property.
You can still do this. Go online to ThinkGlink.com and use the amortization calculator to figure out how quickly you have been paying off your mortgage. You should be easily able to calculate how much principal is left.
Let’s say your loan was for $200,000 originally. On a straight 15-year amortization schedule, you would have paid off about $50,000 in principal at the end of the fifth year. You would still owe about $150,000. At the end of the tenth year, you would owe about $85,000 in principal on the loan.
Unless you specified that the seller had to keep the cash you paid him separate, there’s no reason I can think of why he can’t do what he wants with the money you pay each month. It’s the seller’s money.
You need to keep track of all of the payments you have made to the seller, but the seller is probably not required to account for the cash you have paid in any specific manner. From your perspective, you just need to know how much equity you have built up. Your seller financing documents might have additional information on how the payments were to be applied.
Take a look at the documents and then you might be able to figure out where you stand in terms of the amount you still owe on the seller financing loan.
If you’re planning to pay off this loan, and have paid extra along the way, you may have to hire an accountant to calculate exactly how much you owe the seller at this pointA Point is one percent of a loan amount.. You should also check your loan documents to see whether you are allowed to pay off this loan early.