Oggi is correct; however, doing so MAY create a potential tax exposure problem for you.
You see, I believe if you don't charge interest, the IRS can still tax you on what they figure you should have earned in interest. The IRS has many "interest rules" regarding making personal loans so the bottom line is that you should talk with your CPA or Tax Advisor on the best way to proceed.
In fact, if one follows IRS guidelines the setting of a loan rate actually depends on:
1) The month your promissory note is created, and
2) The term of the loan: Short-term (3 years or less), Mid-term (> 3 and <=9 years), Long-term (> 9 years).
The setting of what rate is appropriate is "controlled" by the IRS via their monthly Index of Applicable Federal Rates (AFR) Rulings, which you can see here: http://www.irs.gov/app/picklist/list/federalRates.html
1. As Oggi says, you are not legally required to charge any interest.
2. A financial planner or CPA should be able to give you a number based upon the costs you will incur for carrying the loan. These are administrative costs that come out of your pocket that you may chose to absorb or that you my charge back to the buyer in the form of interest. Either way, it's a good idea to find out what the costs of carrying the loan will be (nothing is free).
Oggi Kashi - 415.690.3792 direct
Broker Associate, Paragon Real Estate Group CA DRE 01844627
All data from sources deemed reliable but subject to errors and omissions, and not warranted.