Refinance an interest-only seller-financed note?

[Kelly Payne]

Hi all,

I'm trying to hash out the details of a deal I have. The house is worth $95k, the purchase price is $56k. The seller has agreed to an interest-only loan of $100/month with a 5 year balloon.

My first question: Will this type of loan qualify for a refi with a traditional lender when the time comes?

My second question: Does this arrangement put me at risk of appearing "predatory"? The seller is very happy, and I backed into the payment based on gross rent - expenses, but that interest rate works out to be incredibly low (.02%). Are there any risks to myself in moving forward?