Today, they normally demand upfront payment, so the buyer has to borrow from a bank. These loans are extortionate. The buyer normally pays the bank back about double what he borrowed, over about 30 years.
Instead, the buyer could offer to pay 50% extra on the cost of the house. But he will pay some of it in installments over 30 years. The bank gets nothing, and the buyer and sellers both make huge savings.
It wouldn’t be suitable for every sale, but it would for many. So why don’t people do it? Is there some legal restriction where only the banks are allowed to do this kind of financing?
There’s no particular legal restriction that I know of, but there are practical ones. It means having a huge financial relationship with a stranger for a very extended period of time. Banks are set up to judge a person’s credit worthiness and then pursue payment if someone reneges on a mortgage, but your average citizen is not. A mortgage with a bank means leaving the risk to the bank (or investors in mortgage backed securities).
You’d have to draw up a contract with penalties and securities, same as any loan. It might help if you have a way to judge the buyer’s trustworthiness, which would be more common in rural areas.
A bank keeps the deeds to the house until you’ve paid it. So you don’t own the house at all until you pay your debt. That could be an option too.