Creating A Note For Refi?
Is it legally possible to create a note that the buyer is your business and the seller is yourself, to refi and cash out of an old loan.
Example = John Doe Seller creates note for 100K and sells to Jon Doe Investments, LLC. Then John Doe Investments , LLC sells to note brokers at a discount.
If this is possible anyone know the ropes on this?
The guy is a friend of mine. His score is a 570. He bought property on a land contract about 6 months ago. He has 3 years to convert the contract but wants to do it now. He tried finding lenders to convert him out. They tell him one of two things not enough season on the note or credit is an issue.
So he asked me what I thought. I told him maybe he could create a note as him both the buyer and seller. Sell in his name cause thats how the contract is wrote up and purchase in his new company name. Then put the note up for sale. Kind of do his own refi. Two notes may have to be created though. A "wrap" And Second maybe. Does that make any more sense or no? Unless someone knows some lenders who will do it
With that much time on the note left, 2.5 years, I would have your friend concentrate on his credit. He can make great strides on improving his credit between now and then and be in a much better situation both with seasoning and with his credit. If he can show equity, 12 months of timely payments and improved credit he should be able to refinance depending on the LTV.
Have him explore the credit forum on here and on creditboards for ideas of how to tackle his credit issues.
The advice of creating a note and selling the note seems to be poorly given advice as I am not sure of any situation where that would work.
Good Luck.
The basic concept is that you get a equity loan, use that to pay down the main mortgage and then use the equity line account as your checking account. When you have unused funds in the checking account it would basically count as money paying down the equity line debt and in essence earn you good interest on a checking account.
It could be good if you are smart with your money. But, if you live paycheck to paycheck now, this wont change that. Here is a question I have:
When you have credit on your credit card, do you use it? If its there it is tempting, right? Well if your mortgage was your checking account, then yes your extra money would go to good use instead of sitting in a checking account getting little to no interest. But, if after paying your bills and there is money left over on the equity line, are you going to spend it?
Some people are good with credit cards and dont keep a balance. Those that keep a balance dont lower their balances because when they pay it down they use it again. As long as you dont do this with your mortgage/checking account it could be good. But, the rates on equity lines of credit are higher than you can get a mortgage for.
If you want to pay your mortgage off quicker I suggest this:
If you have a lot of other debt and equity in your house, refinance your house with a mortgage (hopefully at 80% so you can get a great rate). If you dont have a lot of debt or equity, just keep your existing mortgage and send any extra money you have to your other debts starting with your highest interest first. Next step is to shred your credit cards so they dont tempt you (I have refinanced people who paid off their credit cards and they have ran them up again). Then, the best program I have seen to pay off you mortgage quickly is to do biweekly payments. By doing this, you make one extra payment per year to bring down your principal and you make your payments halfway before they are do, thus the interest paid will be decreased. Then, if you have extra money at the end of the month, send it in to the mortgage. This will be kind of like the plan you mentioned except instead of your extra cash going to your mortgage at the beginning of the month you do it at the end of the month. You also wont have access to this money so you cant take it back and use it like in the equity line. With this plan too, you have your entire mortgage at a lower rate (low 6% with good credit) versus having a second HELOC at 8%+.
Hope this help with your decision. Now I want to ask you why you are so eager to pay your mortgage off? If you PM me I will send you a PDF article that explains the best mortgage and how to leverage yourself.
Here are some questions to ask yourself:
Which would you rather have, a paid off house with little to no money in the bank or a house with a mortgage lots of money in the bank?
Can you invest your money and make more than what you will be paying on your mortgage? Can these invests be compounded annually while your mortgage interest you pay is simple interest?
It is not always best to pay off your house as quickly as possibly. Where else can you get a loan for low 6%? Best thing to do will be to get a financial advisor and set up a plan to save money while paying your mortgage payments. The best mortgage available, if used correctly, is the 30 year fixed/10 year interest only. Again, contact me and I will send you this article I have. Best of luck.
Quote:You Must Have A Posative Monthly Cash Flow AND Be Responsible With The Available Credit. I agree with you completely that in the wrong hands this loan could be catastrophic!
I believe that we have already seen the catastrophic events in the housing market due to people who are not good money managers, who over leverage, and arenot responsiblewith available credit.
Tyler 3283 is correct, this program is a powerful tool that can be used to pay off one’s home in a shorter time than normal. This is because this program allows you to pay down principle rather than interest first. But it is more than that.
I am also a mortgage broker, and have been placing clients in this loan for the last year (It’s new to the US-big in England and Australia). Another benefit we have found invaluable with this program is, unlike paying down a standard mortgage, where you no longer have access to those funds, this allows you to access new and current home equity for investments without refinancing. Obviously this would not be so good to access for unscrupulous spending, but it is useful for investing.
This is especially useful to people on this site, as they are the ones putting themselves in a position to take advantage of the current market downturn, and this oftentimes requires a large amount of capital. But who wants to pay interest on that capital when it is not being used?
If you want to get a definitive answer on how this compares to a standard mortgage, give me a call (Tim 760 798 0383x1090). I can walk you through a calculator that will show exactly how much you may save in interest on this program and how much you would be paying down the principle. This program doesn’t work for everyone, but if you do have positive monthly cash flow, it can save you a significant amount of money and pay off your mortgage in a fraction of the time.