Posted by GlenSoCal on December 03, 2001 at 22:52:55:
Michael Morrongiello,
Thanks. That’s one for my printer.
Printing…
GlenSoCal
How do i get someone to remove a 2nd mtg.? - Posted by ct
Posted by ct on December 03, 2001 at 17:12:06:
These people are motivated.What are some options for us?62000 1st @7.5,2nd 42000 @12%,house is only worth 110000.thanks
Use the “Paper” to raise cash (move it) - Posted by Michael Morrongiello
Posted by Michael Morrongiello on December 03, 2001 at 18:10:28:
CT:
Another thought is to consider “walking” the 2nd mortgage to another entirely different property that will serve as collateral for its future repayment. This property can litterally be located anywhere.
If you or lets say someone you know (a partner, etc.) is willing to allow this 2nd lien to be placed upon their property, then you would simply continue to make the future payments on the loan.
If you can quickly fix up and resell this home to get your “profit” or apparent equity out, then you will now have the use of that lump sum cash resulting from the property sale for other investment opportunities.
IF this 2nd mortgage has been problematic the holders they VERY well may be willing to allow it to be BOTH moved and also re-structured so that you can amortize it our over a long period time.
We recently acquired a home, where the motivated seller agreed to take back a 2nd lien mortgage on our personal residence (with the rights to move it again and again, and to also continue to subordinate it, in the event we ever refinanced our home, etc.)
We then renovated the home we acquired, put it into top notch condition and sold it off to a “retail” buyer for $777,000.00… We Now have the use of the funds that would have been earmarked to pay off the seller over a period of 5 years. I plan on at least doubling if not quadrupling those funds over that time frame through other investments.
To your success,
Michael Morrongiello
Re: How do i get someone to remove a 2nd mtg.? - Posted by Richard-FL
Posted by Richard-FL on December 03, 2001 at 17:44:40:
ct,
How much would a similar house in the area rent for per month?
If it will rent for the same or more than the amount the house would cost you to have per month, take the property subject to its existing financing (“subject to”), or get a lease-option on it where the purchase price would equal the mortgage amount at the time the option is exercised.
Then you could lease option the house to a tenant-buyer for more than your monthly costs with a purchase price at least 10% higher than the home’s market value for an option period of 12 months.
Then when your T/B exercises their option, they cash you out, and you “get the 2nd mortgage removed” by paying its remaining balance at closing (along with the first mortgage, of course).
If the T/B decides not to exercise their option, let them walk, or let them pay you more option consideration to let them have another 12-month option, or find you a new T/B.
Hope this helps.
Richard-FL
Re: How do i get someone to remove a 2nd mtg.? - Posted by GL
Posted by GL on December 03, 2001 at 17:37:54:
You can contact them and ask if they wish to sell the mortgage at a discount. If they have not been getting payments regularly they might go as low as half off.
If you don’t have the money to pay it off could you refinance? And could the first mortgage be bought at a discount?
Let’s play with some numbers. If you buy it at $110,000 you would need $6000 for the owners and take over the mortgages. Now what if you got a new mortgage? Well 80% of $110,000 is $88,000. If you could negotiate the first mortgage down to $51,000 and the second down to $31,000 you could pay them off out of the new mortgage proceeds, get back your $6000 down payment and have it for a cost of $88,000 with 100% financing.
Just playing with some numbers.
Re: (move it) - Posted by GlenSoCal
Posted by GlenSoCal on December 03, 2001 at 21:16:33:
Michael Morrongiello-
–We Now have the use of the funds that would have been earmarked to pay off the seller over a period of 5 years–
Just so I can better understand, did you arrange for the sellers to finance that second over 5 year period instead of pay the full sale price at closing?
And what would the difference be in just taking a second out on your home? Better interest rate from seller? Also, could you over-collateralize your home (new term) so that the sellers lein could be subordinated beyond the value of your home? Or would the loan be structured that you cannot, for instance, refinance for more than 110% of the value of your home so there is protection for the sellers carryback?
Thanks for your posts.
GlenSoCal
Re: (move it) - Posted by Michael Morrongiello
Posted by Michael Morrongiello on December 03, 2001 at 21:55:04:
Glen:
Let me address your questions;
- Ddid you arrange for the sellers to finance that second over 5 year period instead of pay the full sale price at closing?
A- Yes, they agreed to take back a 2nd lien for part of the purchase price of the home. That means I did NOT have to come with the FULL sales price in cash at the time of closing
- And what would the difference be in just taking a second out on your home? Better interest rate from seller?
A- The interest rate the time WAS slightly better than if we would have simply borrowed the funds as a 2nd lien or line of credit / home equity type loan on our home. BUT in my mind the some of the REAL benifits were that we didn’t have to go through any lender qualifying criteria, have our debt to income ratios or credit scrutinized, or have another appraisal done, etc.- On top of all of this was a willingness for the seller who took back the 2nd lien to offer us the following incentive clauses as well:
A) First right of refusal to purchase the 2nd lien in the event the holder decided to sell it in the future
B) The right to move this 2nd lien to other collateral that we own (even in another state) - Try this with your bank!
C) A stipulation that they would continue to subordinate to any refinancing we might do on our home or other properties in the future… (This precludes us from HAVING to pay off their Note)
- Also, could you over-collateralize your home (new term) so that the sellers lein could be subordinated beyond the value of your home? Or would the loan be structured that you cannot, for instance, refinance for more than 110% of the value of your home so there is protection for the sellers carryback?
A- I suppose you could have… however that was not our intention. We wanted to make the seller comfortable that there was some protective equity in our home (which there is) and also had verbiage state in the 2nd lien trust deed that they could not unreasonably withold our ability to move the trust deed as long as the substituted collateral adaquately secured them.
Now that we’ve resold the home, we have the use of this cash which we effectively have borrowed for 5 years at a nominal cost to us.
Hope this helps…
To your success,
Michael Morrongiello