Help with note structure - Posted by Dave in NOLA

Posted by Josh on March 14, 2003 at 08:33:43:

Sounds like you could agree to hold the note at $40,000. If you work with an end investor, they could agree to buy $24,000 worth of payments from you, provided that was used to retire the 1st mortgage, and then after however many payments they’ve bought, you could continue holding the mortgage.

Help with note structure - Posted by Dave in NOLA

Posted by Dave in NOLA on March 13, 2003 at 13:17:00:

Here are the facts:

2 bdrm 1 1/2 bath condo
Agreed upon price: $44,000
I owe $23,850 on it.
Buyer has 10% to put down.

How do I structure the note so that I can retire the mortgage I have on the place and become the mortgage holder for the buyer? In other words, how do I pay off my mortgage and become the lienholder if the buyer only gives me $4,400?


Re: Help with note structure - Posted by Dave Dye

Posted by Dave Dye on March 14, 2003 at 09:06:30:

First, what is the market value? Will the buyer live there or rent it out? If we assume it will appraise at $44K, write a first mortgage note for $35,200 (80% loan to value LTV) at 8% interest or so. Higher LTVs can make the note less valuable. Then write a 2nd mortgage note for $4,400. Sell the first mortgage note in a simultaneous closing to a funding source. The proceeds of this note sale plus your $4,400 down payment from the buyer should be enough to pay off your $23,850. You can increase your proceeds with a balloon payment clause in the 1st mortgage. Plus, you will receive payments on the 2nd mortgage. This assumes the buyer has decent credit, requires proper due diligence, an appraisal, some closing costs, etc. You will save yourself time and money if you get a note buyer lined up who can coach you on how to structure these notes to maximize your benefits.

Re: Help with note structure - Posted by Cory

Posted by Cory on March 14, 2003 at 01:18:06:

You could easliy owner finance. That would keep you in the first position of the mortgage, but would not allow you to staisfy the underlying financing. Unless the buyer can find a hard money lender to provide the payoff, I would suggest looking to an investor to provide the funds. It really depends on where your priority lies: 1)In getting your mortagage paid off or 2) Selling this property and possibly holding a small second.