# Help with Ed's example? - Posted by David Wright

Posted by Ed Garcia on July 07, 2003 at 10:29:23:

David,

When you purchased the property, you borrowed \$65,000 from a ?Hard Money Lender? paying off the sellers \$30,000 first mortgage and replacing it with a new first mortgage of \$65,000.

The escrow company, title company, or attorney, who is ever handling your deal, will simultaneously record a new first mortgage for \$65,000 to your hard moneylender, and a second mortgage for \$15,000 to your seller.

That?s how it works,

Ed Garcia

Help with Ed’s example? - Posted by David Wright

Posted by David Wright on July 06, 2003 at 16:19:03:

Example:

I find a house that has a small balance on the first. Lets say the house is worth a \$100,000; the balance on the first mortgage is \$30,000.

## If I wanted to buy this house for lets say \$80,000, I could ask the seller to carry back \$15,000 and go to a hard money lender to borrow 65% of AMV (appraised market value) of which is \$65,000 and the seller carrying \$15,000 in second position, would ad up to \$80,000. It would also give your seller \$35,000 new cash, and \$125.00 income on the \$15,000 loan that they carried at 10% interest only, for 5 years

First off I know very little, bear w/me.
The difference between the AMV(100K) and the amount still owed(30k) is 70K. I’m sure part of that is appreciation.
Do you need to know how much is equity?

What happened to the other half of the first(15k)?

Yes, 65 and 15(is this the other half?) add up to 80(65 in cash). Your not going to give 65 to the seller so why borrow so much?

Where does the amount of 35k come from? This is the amount your going to give the seller to complete the sale? How can you borrow 65k on a house your not going to buy until you give them 35k?

This will leave 30k of the 65k borrowed. You can pay the 15k on the first. Still have 15k and owe 65k on a 100k property. If you pay off a first does the second now become the first?

Where does the 125.00 amount come from? Why do you consider it?

Sorry, it seems like a simple example. Help me understand.