In a seller carry back mortgage, who determines the interest rate?

In a seller carry back mortgage, the interest rate is determined by both the buyer and the seller. This situation arises when the seller agrees to finance part of the purchase price of the property, essentially acting as the lender. During this process, the two parties negotiate the terms of the mortgage, including the interest rate, based on various factors such as the prevailing market interest rates, the buyer’s creditworthiness, and the seller's willingness to take on the financing risk.

By having the buyer involved in the determination of the interest rate, it allows for a more tailored agreement that considers the financial capabilities and needs of both parties. This collaborative approach can result in a mutually beneficial arrangement that may help the buyer secure financing when traditional lending options are limited or unfavorable.