Contract for Deed – Minimum Interest Rate

To close the loop, yes there is a minimum IR for a CD. Similar to the max rate, the min rates are posted monthly by the IRS. Here is a link to the most recent published minimum rates – “Applicable Federal Rates” (April 2011)

The idea of the minimum IR is to ensure you pay taxes on the transaction vs. add the IR to your sale price  for a higher sale price.  If you pursue a CD claiming no IR the IRS will apply the AFR to your transaction for tax purposes.

When you are considering a CD – whether buying or selling it is useful to put all the moving pieces together and compare.  A basic Mortgage Amortization template in excel will be a necessary input.

Here is a grid that I recently created and used:


Sale Price


Interest Rate (enter into Mortgage Amortization template)

Loan amount (SP – Downpayment, enter into Mortgage Amort template)

Sum of payments (multiply monthly payment (from morg amort template) * total months)

Payoff (from mortgage amortization template)

Net (Downpayment+total payments + Payoff)

Each column can list a different scenario.  You can color code offers and examine the differences.  Some people will prefer a higher downpayment for others a strong interest rate is a deciding factor.

Excel has a variety of free templates under the search “Mortgage Amortization”

About Ingrid Friel, Realtor, GRI, MBA

Enthusiastic, knowledgeable and patient realtor specializing in the Twin Cities downtown and nearby residential properties. Experienced with first time and repeat buyers. Excellent technical skills that help you do the first pass of your search online. My top priority is to find you the best fit for your criteria when searching for your next home. When representing sellers I work collaboratively to get your house ready to list and stay in close communication throughout the selling process. We call Eden Prairie home & love to chat about everything local with anyone interested.
This entry was posted in Buyers, Contract for Deed, Real Estate, Sellers, Uncategorized and tagged . Bookmark the permalink.

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