Posted by Ed Garcia on January 23, 2001 at 10:31:40:
What you are doing when you amortize the payments for 30 years with a 5-year call. Is, your allowing the buyer to have a small payment making it easier for them to qualify for the new first, however the loan is only for 5 years.
If you buyer doesn’t pay you off in 5 years, you can foreclose on your second taking back the house. Hopefully the house will be worth more in 5 years than it is today and so you will be all right. Many sellers attitude is a don’t care attitude because they know that they have income for 5 years and then either get a lump of money or a house with more equity than before.
On your second question, I would sell the house and carry back the second. The reason is because, now I have an asset with no liability. That means you have your second mortgage as an asset, and have no debt. You are not liable or responsible for the first mortgage unless you decide to foreclose. That means one less loan in your name allowing you to have more borrowing power.