I assume we'd have a 'regular' collector receiving payments, sending out late notices if needed, etc... and getting a piece of the action for their trouble... I would guess we'd receive ~~5.5% right now, which is quite above anything out there that is really safe...

If you don't have the experience and temperment which would allow you to act as collector yourself, this is probably a bad idea. I think that the cost of hiring a "regular" collector would substantially reduce the return you would get. Probably putting it in the same range as a T-bill.

Not a criticism, just an observation.

The other thing to think about is could your wife do the collecting if you were not available for any reason? How about your heirs?

I have years of experience in collecting rents and would have no problem collecting a mortgage myself, and my wife could do the same. Maybe our kids could do it in 15 years, but they are not ready now.

If you decide to do it, don't forget to put in a clause with a really draconian late fee--the highest the law will allow. If your buyer balks at this be prepared to look him straight in the eye and say: "You aren't planning to be late on any of these payments are you?" If he isn't, the size of the late fee should not matter to him.