Posted by John Behle on November 21, 1998 at 12:48:44:
The technique works fine. There is no problem with the due on sale clause, because you are paying the first loan off.
The figures used in the example create a yield for the note investor of 10.78% That’s on the low side. Your loan to value ratio is 65/75 or 87%. That is also quite high for most investors - expecially if your purchase price is $63k. Many do not like to finance above the sales price.
You’d be better off just getting a new $50k first loan - and cheaper.
Owner Financing and the due on sale - Posted by breeves
Posted by breeves on November 21, 1998 at 11:44:13:
Browsing thru some of my old John Schaub newsletters and read about the following technique.
SFH - FMV 75,000
Exiting Mortgage 50,000 - due on sale clause
Purchase price 63,000
Buy with 10k down and create 1st for 65k,9%,15 yrs w/7yr ballon
Sell 1st for 60k, pay off underlying of 50k and offer to end user with Owner Financing for 10k dwn and 65k note.
Is this type of deal a way to get around the due on sale?