Posted by John Behle on October 23, 1998 at 14:30:42:
If it is a conventional or institutional lender, they rarely discount in any way if the loan is current. They do take discounted payoffs at times on defaulted loans.
If it is a private mortgage holder, they do it all the time. I mentioned this in an investor group at a presentation I was giving and two weeks later one of the students came to another presentation and remarked, “John I saved $17,000 off of three words you said.” The words were “will you discount”. He was just refinancing a property and getting ready to pay off a $51,000 long term private loan. He asked for a discount and they took $34,000. He put 17k in his pocket from the refinance because he had asked.
So, yes and no. Banks rarely discount individuals commonly do. If they don’t discount, I offer them the trade of another note that I have bought at a discount. This technique will work with institutions if the loan is not current or they know they are at risk from a high LTV. It’s a negotiation challenge, but can work.
When you have private loans on properties, a very profitable technique - especially with today’s rates - is the “Discount Refinance”. You negotiate a discount and then refinance the property for a lessor amount or for the same amount and put cash in your pocket. Combine that with “Equity Arbitrage” and refinance that for more and invest in notes at a higher rate - further lowering your “net” payments and increasing your net worth.