Posted by Sean on April 13, 1999 at 20:54:47:
Who holds the 80 and who holds the 20% loan?
There’s a technique mentioned in the cash flow forum that might help you. It would work easiest if the 80 percent mortgage is held by a private party but it is still a possibility if only the 20 percent one is held privately.
Let’s assume you owe $47,500.00 (the 80%) to a private person. You would look for a note with the same or higher interest rate and worth about $47,500.00 face value. Many people who buy & sell notes can make a note the right size for you once they know the interest rate you need by cutting larger notes down to the size you need.
Let’s say the note has a face value of $47,500.00 at 10 percent interest paid out over 30 years. You agree with the guy who owns the note to buy it for $39,050 and you agree with the guy who holds the $47,500 mortgage to trade the note you’re going to buy (face value $47,500) for the one he currently holds (face value $47,500, better interest rate and safer – better loan to value).
Get it from both guys in writing, then go to the bank and get an 80 percent loan on your 70,000 house ($56,000 total). Use $39,050 to buy the note (leaving you with $16,950 cash left over). That note pays off your 9.75% first. Use the $16,950 to pay off the $11,500 second, which leaves $5,450 cash to put into your pocket.
Don’t know where to find a note? Call those ads in the paper, the “I BUY NOTES” people and ask them if they’ll sell you one. Tell 'em you need one face value $47,500, paying at least 10% interest and ask 'em how much. If they don’t have one the right size, tell them you’ll buy a partial of a larger note if they’ll cut it up for you.