subject to questions
I have a few questions about purchasing a home subject-to.
1. How do you handle a mortgage where there will be a balloon payment due soon?
2. When the mortgage has a variable interst rate, do the monthly payment change with the interest rate? If so, how do you work that into your tenant/buyers payment?
3. How do you deal with a early payment penalty? It seems that could really hurt your back end profit.
Thanks for any answers you can provide. 
sanderso1019,
Quote:
Q. How do you handle a mortgage where there will be a balloon payment due soon?
A. You don't handle it, unless you are prepared to cover the balloon payment. I recommend staying away from properties with balloons unless it is at least 3 years from ballooning since I have my buyers re-finance normally in two years.
Q. When the mortgage has a variable interst rate, do the monthly payment change with the interest rate? If so, how do you work that into your tenant/buyers payment?
A. I do no sell to tenant/buyers, however when I sell with a Contract for Deed it is disclosed to my Buyer that the loan is an ARM loan, no big problem for the Buyer.
Since your T/B's are in essence purchasing the property, just disclose the ARM in your paperwork.
Q. How do you deal with a early payment penalty? It seems that could really hurt your back end profit.
A. First you would deduct this amount from your sellers perceived equity, good for you. Now just include the amount of the pre payment penalty onto the selling price of the property.
Remember you are dealing with Buyers with some type of credit problems, so they are very flexible on the terms you offer them.
John $Cash$ Locke