Is this legal??? - Posted by tim

Posted by John Behle on January 24, 2000 at 20:27:40:

Many lenders have less “title seasoning” requirements than others. Some will refinance you right away. Others won’t. Nothing wrong or illegal with it if they will.

There are a couple problems. One - to refinance you would have to pay off the second or get them to subordinate. You can’t get a new first and not involve the second in some maner.

You could secure their note by another property, have a “partial payoff - partial subordination” situation where they agree to receive a certain amount (like half) now and subordinate to the refinance. That is assuming the lender doing the refinance has no problem with that.

You could also build a pre-payment discount into the note, that if you pay them off earlier than the 6 months they will agree to a discount. That may not be too likely as 6 months isn’t that long to wait.

You can of course pay the second off in full and you would be better of with the rate on a new refinance over the private money rate.

The second problem can be the private money. Even with 13% and a 60% LTV most private lenders would not be interested. Some will want a higher rate. Many will want points. Points are fees up front that you won’t receive back when you refinance.

Now, if you find a private investor that will loan 13% with little or no points - wonderful.

Is this legal??? - Posted by tim

Posted by tim on January 24, 2000 at 19:02:05:

I just finished reading LeGrand’s article on slit funding, and I was wondering if the following would be legal:

House for sale, appraised for $50,000. Worked out offer with seller for $45,000. $30,000 now and the rest in 6 months, secured with a 2nd all due in 6 months.

Obtain a private loan for 60% LTV ($30,000), 13% for 15 years with a ballon in 5. Give this to the seller.

Get title, then refinance with tradtional lender at a lower rate and 90% LTV ($45,000).

I am looking to keep the house as a rental, and wanted to know if something like this would work and if it is legal.

Thanks for the help,