I was wondering how you figure out which rate to charge people who are buying MH from me. I am using owner financing. One of the buyers has bad credit should I charge a higher rate? Thanks Joe
You will have to decide what rate makes the most sense. Obviously ,you want to make some money since you are carrying the note, but, you do not want it to be so high that the buyer gets in over their head.
Find out from the buyer what their range is and then work from there.
<<One of the buyers has bad credit should I charge a higher rate?>>
You are taking a higher risk, so you should be adequately compensated for the risk. It’s all about RISK/REWARD.
Thanks for the replies I appreciate all the information I get from this website and forums. JOE
I say bad credit and personally financing a mobilehome spells HEADACHE. Unless the buyer can verifyably demonstrate that their situation has turned around, then perhaps the risk is worth it. I suppose if you are stuck with a dog and can’t unload it conventionally, might be another reason. People with bad credit (and making some generalizations here) seem to have strange beliefs about repaying debt. I would let a bank deal with it. Neither a lender nor a borrower be so the phrase goes. I can be pretty sure since you asked the question here, that your MH is difficult to unload but unless you have experience in repossesion, you may be in over your head and certainly legal fees will consume any higher rates should you get a deadbeat repeat.
Should you charge a higher interest rate? Sure, I guess. A higher interest rate and longer term keeps their payments down but lowers your yield. What I do is sit down with the buyer and start playing with numbers i.e. term, interest rates, payments, etc. I have four of these deals and the median on all of them are around 13%, which I think is still low. Banks just stick it to people who are buying older tin cans for obvious reasons. One lady told me that the bank she WAS working with was going to charge them 18% interest. Again take it with a grain of salt but still when she asked me what I usually charge and I told her my median she couldn’t believe it. Yeah its nice to make money on the interest rate but the key is how much down and how long are they making payments. Hell 0% interest rates are great if the downpayment is nice and payments per month are what your looking for. Keep it in perspective,