Can I Refinance a Contract for Deed?

Refinancing a contract for deed can be a useful personal finance strategy.

Refinancing a contract for deed can be a useful personal finance strategy.

Technically, you don't refinance a contract for deed. Instead, you get a new bank mortgage to pay off the seller who holds the contract. To figure out whether such a move is your best choice or even doable in your particular case, you need to look at your contract's wording, your finances and the property involved.

Contract wording

A contract for deed is simply a written agreement -- between the buyer and property owner -- setting the price, interest rate, down payment, term of payments and other conditions for buying real estate. Essentially, the seller acts as a bank. Compared to conventional mortgages, contracts for deed are faster, more flexible and easier to set up for both parties. However, you need to make sure your contract allows for the possibility of early payoff and that the seller has clear title to the property. Other names for a contract for deed include land contract, bond for deed and installment land contract.

Your finances

Historically, contracts for deed have been popular with would-be homeowners who otherwise wouldn't be able to qualify for a mortgage: young adults just starting their careers and people living in areas with high real estate values compared to their income. To refinance your contract, your credit history must be good enough to qualify for a mortgage.

The property

Sellers offer contracts for deed to potential buyers for various reasons, including tight credit, competitive markets, and because no bank would ever finance the property in question. Examples of the latter could include houses that are overpriced, those in need of major repairs, or those for which the ownership history is clouded. When you proceed with refinancing, the bank must get a clear title and appraise the property to make sure the purchase price is appropriate to its value.


There may be good reasons to keep your contract for deed. However, if you have good credit and you plan to stay in your house a few years, it might make sense to refinance. It's definitely a good idea if you can qualify for a mortgage and you have a large "balloon" payment coming due shortly. Just make sure the numbers work out for you to recoup your closing costs, which could be several thousand dollars.


About the Author

Tom Wilkowske has been writing professionally since 1984. He has written about home, gardening, food and dining, business, politics and personalities. His work has appeared in "Lake Superior Magazine," "Cabin Life," "Minnesota Monthly," the "Duluth News Tribune" and for Bloomberg News Service. Wilkowske earned a bachelor's degree at the University of Minnesota's School of Journalism and Mass Communication.

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