Private Mortgage Creative Real
Estate Financing
Technique #8...
A private mortgage
can be moved from a senior to a junior position. Take a look at the following situation: A seller has a property on the market for
$60,000.
There is an existing private first mortgage on the property in the amount of $30,000.
Approach the private mortgage
lender to see if the mortgage can be moved from a first
position (senior) to a second position (junior) if you pay $10,000 in cash. Agree to pay the cash after a new first mortgage is secured. This will reduce the mortgage from $30,000 to $20,000. Next, put a new $40,000 first mortgage on the property; $10,000 of this will be the cash that goes
to the private mortgage holder and the other $30,000 ($40,000 less $10,000) will go to the seller. this no money down technique works well when the private mortgage holder is not willing to discount the mortgage in return for a complete payoff.
If you own property that has a private first mortgage, you could use this same technique
to remove your equity for other investment purposes. However, many people like the security of having equity in their homes.
|
Example
Summary
Technique #8
|
|
Move
A Private
Mortgage From
A Senior To A
Junior
Position
|
|
|
|
What
You Need To
Begin:
|
|
Good
Credit
|
|
|
|
Summary
Of Terms:
|
|
Asking
Price
|
$60,000
|
|
First
mortgage
|
$30,000
|
|
|
|
Procedures:
|
|
Agree
to pay the
mortgage
lender to move
mortgage to a
junior
(second)
position.
|
$10,000
|
|
A
new second
mortgage
results from
this
transaction.
|
$20,000
|
|
Obtain
a new first
mortgage.
|
$40,000
|
|
Pay
second
mortgage
holder.
|
$10,000
|
|
Pay
the balance to
the seller.
|
$30,000
|
|
|
|
Results:
|
|
|
- The seller receives
$60,000
for the
property
and
receives
all cash
for equity
in the
property.
|
- The
buyer has
a no money
down deal,
a $40,000
new first
mortgage
and a
$20,000
second
mortgage.
|
- The
original
private
first
mortgage
lender now
has a
second
mortgage
but has
received
$10,000 in
cash.
|
|
Specific
Situations to
Apply
Technique #8
|
|
|
|
The
Property
|
|
Existing
1st or 2nd
Mortgage
Private
|
|
|
|
The
Buyer
|
|
|
|
The
Seller
|
Private Mortgage
to Bank Loan
|
