Posted by Rob Blake on January 21, 2000 at 01:40:21:
Here’s a thought…make it the sellers problem. See if you can’t get him to give you back some of the expected increased payments for you to take on this “interest rate risk” of HIS!
Next a lot of Arms are what they call 'convertable" arms. For $200-$300 the borrower can fix the loan at current rates. If so get your seller/borrower to pay the 200 bucks to lock it in. There is no requalifying to do this. You just request it in writing and pay the fee. Catch: mortgage has to be current at the time of the request.
Next find out what kind of arm is it. READ THE NOTE. Don’t take anyones word. If is a 6 month LIBOR I’d just walk…some of those can go up 4 points in 6 months…however if it is a 11th Dist COFI…don’t worry, they move so slow it would take 3 years to get hurt…and you’d be out by then.
If none of that works, use the commercial leasing trick. Base the rent off a percentage of the value…which means as value increases so does rent. Find out the adjustment month in the underlying loan and set your adjustment a month before.
Or lastly, just stipulate values are increasing, for example 12% a year or 1% a month, and just bill them for the rent monthly (escrow company will do this for you)…once again like office space.