Re: seller held 2nds… - Posted by Paul Macdonald
Posted by Paul Macdonald on December 13, 1998 at 19:57:22:
You are correct. Standard underwriting guidelines say 5 yrs or more if they are to allow the 2nd (assuming a shorter amort. won’t payoff the note while staying within DTI ratios).
A possible way around the buyer not bothering to refi. soon enough is:
If the DTI’s work at a higher interest rate charge that rate. And in writing, and shown to the lender, you offer the buyer an incentive to refi. early. Say for instance its a 5 yr. amort. and balloon at 21% interest, but if you pay it off within 3yrs Mr/Ms. Buyer, I will discount the 2nd by calculating from the gitgo the note at 11% (or whatever). If the DTI’s work the lender should have no problem with it and your buyer will bust a gut to pay you off early… and of course I don’t have go into details about the benefits if the buyer blows it…
I’ve only seen it done twice but both times it worked like a charm.