Good clauses to have in a note - Posted by Jack
Posted by Jack on November 04, 1998 at 15:20:03:
I have a local investor who has agreed to refinance a rental property I own. I want to use some of the dead equity without selling the property, which I can’t do at this time.
The investor, with whom I had a prior business relationship that turned out well, has some rental property himself, but is somewhat unsophisticated (unlike me :-P) and is largely only concerned with getting a good interest rate. He has left it up to me and my attorney to draw up the mortgage and note.
While staying within the bounds of fairness, I am looking for all the advantageous (to me) clauses to have my attorney include. So far I have: no prepayment penalty (a given), substitution of collateral with note holder’s permission, first right of refusal in the event the note is offered for sale (which is not likely), subordination clause with written approval, principal payment reduction, property is sole security, and NO due on sale clause.
I am considering some form of balloon rollover–lender wants a five-year balloon–or graduated payments as discussed in a post below.
I welcome any and all suggestions.