Posted by Monique on February 27, 2001 at 07:39:18:
This is fundamentally a question about the paperwork for your state.
To write a secured note (I assume you mean secured by real estate) you will need to have a Promissory Note and a Mortgage or Trust Deed – which one is needed depends on your state. Definitely seek counsel from your real estate attorney to do this properly the first time.
A substitution of collateral clause is a great tool for “walking a mortgage” and keeping excellent mortgage terms that you have negotiated with your seller. Say you bought a property with $100K seller financing with 0%. If you sell your property to a Buyer who gets a new loan, you would have to pay off this beautiful 0% loan to your original Seller – unless you were able to substitute collateral. By substituting collateral you can sell to your Buyer, not pay off 0% loan, and simply move the 0% loan to another property. Now the $100K is secured by different collateral, but you get to keep making payments at 0%.