Overview of the Installment Contract

The installment contract is a legal instrument that replaces both the usual promissory note and mortgage deed of a typical purchase mortgage transaction.

Instead of selling the property outright, the seller is essentially giving the buyer a conditional opportunity to own the property. The prospective buyer should be aware that these conditions can be formidable—but the potential rewards can be very positive.

Most installment contracts are extremely detailed. Because of the complex nature of this type of transaction, the interests of both parties need to be protected. The typical installment contract, however, will contain variations with the following elements:

1.

Down payment requirement

2.

Buyer use of the property

3.

Schedule of payments

4.

Defined (short) term

5.

Seller responsibility

6.

Completion of the purchase

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