I’m having problems with my land contract. Last month, I asked the owner if I had the right to sell the property, and he said yes. However, when I looked into our land contract agreement, I noticed some inconsistencies that have me confused. My husband and I are being charged 6.5% interest monthly, which translates to over $800 going to interest. Yearly, that would amount to 78% interest, which seems illegal in Michigan, where the maximum allowed is 11% annually. I’m unsure how to proceed in this situation. Here’s what the contract states:
Price and Terms: Buyers agree to purchase the Premises from Sellers for the purchase price of $144,500. A non-refundable down payment of $3,000 is due at execution. The balance of $141,500 is payable in equal monthly installments of $900, with 6.5% interest on the unpaid balance. Payments continue until the obligation is paid in full. A late charge of $40 applies if payments are missed. The entire obligation is due in 30 years.
Avery said:
It’s not 78% interest. But it does seem like your payments aren’t amortizing properly over 360 payments. Do you have an amortization schedule?
He sent me a blurry schedule, but I could see that interest is set at 6.5% every month.