All Forum Posts by: Na Christian

Thanks for the quick reply. My goal is to come up with a way to avoid interest payments as a buyer and/or a seller while still providing or receiving financing. It seems like the American system (tax code, AFR, etc.) is set up to reinforce usury. There are some potential buyers who avoid interest-bearing mortgages, for religious or other reasons.

I suppose a prepayment penalty could be setup which would result in basically the same thing as I propose, in other words, a normal mortgage with a lower interest rate/market price/down payment, with a very large pre-payment penalty (starting as equal to the amount of interest owed over 30 years) that would slowly go down as the mortgage amortized. In short, it would negate any advantage to making any early payments, with this advantage to the lender balanced by providing a noticeably lower monthly payment than the $1548.67 to the borrower. Do you know what laws there are about pre-payment penalties, especially regarding seller financing?

It's counterintuitive to me that the $20,293 would be taxable income because the house could still be foreclosed on if the borrower defaulted.

My goal: create an interest-free loan which is appealing to a potential homebuyer, yet doesn't make too big of a discount on my end.

For example: If I sold my $300,000 house with 20% down ($60,000) over 30 years, at 6.7% interest rate: $1548.67 principal and interest per month
1548.67 x 12 x 30 = $557,521.20

What I would do would offer a lower monthly payment and no usury, but it would effectively be like a prepayment penalty.

Arbitrarily, let's say 20% off the monthly payment, or $309.73 less per month: $1238.94 monthly payment.

House would be sold at $446,018.40, which is $111,502.8 less than the total paid with a normal mortgage, but $116,018 more than the market price. This is 20% off, or 80% of the original total cost, if you include interest. Down payment would still be $60,000.

Of course if buyer defaults on the loan I would still foreclose, and I would require home insurance/property tax in escrow like the banks do.

Do you think this would work?