Re: Creating your own Mortgage - Posted by Jon Richards
Posted by Jon Richards on November 08, 2000 at 22:20:36:
You ask the seller to create a seller carry back mortgage for you to buy the property. It is best to add a balloon payment, even though you are the payor. You can then sell part of that note to an investor to generate up front cash for the property seller, and when you pay your balloon payment, the portion of the balloon the investor does not buy reverts to the property seller. The effect is you are giving the seller cash today and cash in the future and those totals can be more than the sale price of the property! It can dazzle everyone.
Here’s an example: You want to buy a $110,000 property with $10,000 down. You ask the seller to carry back the remaining $100,000 mortgage with interest only payments. You then sell ALL the payments and $36,000 of the balloon to an investor to yield the investor 12%. For that investment the investor puts $50,000 in escrow plus the $10,000 all go to you property seller. So your seller gets $60,000 at the close of escrow ($50,000 from investor and $10,000 from you down payment.)
When you pay the $100,000 balloon payment in 60 months, the investor only gets $36,388. The remaining $63,611 ($100,000 minus the $36,388 that went to the investor) goes to the property seller. The propery seller is dazzled! He (or she) got $60,000 at closing and $63,611 in five years…that’s more the the sale price of the property. They think you are a genius.
This concept is not always easy to understand…but we have a special web site which we refer FSBOs to. YOu can check it out at www.create-a-mortgage.com. Good luck, just become a master with your financial calculator. It’s key to wealth.