BiggerPockets

If i take over a loan sub2 that has an interest rate of 7.5%, is there a way for me to negotiate with the bank to reduce the rate?

let me know if you can because that would be cool.

Can you not make it a deal at the current terms of the loan?

So, by taking over the loan (and the property) you're violating the due-on-sale clause in the loan. And you then want the bank to negotiation with you? That seems like a tough sell. By even making that phone call you've informed them of the situation, and given them plenty of notice of what's happened. I suppose the upside is that if they don't call the note due, but then try to at some point in the future you can claim they were aware of the situation from the outset.

Hi, Ray is right on. Jon has a good point!

I have always, always, always contacted the underlying mortgagee (lender) BEFORE doing ANY installment contract, CFD, L/O or Sub2. I have done more than I can possibly remember, had three and a half file cabinets, 5 drawers legal size, full of them.

Why do people think you have to sneak in to make a deal? Just wrong thinking.
I had several banks object, maybe 20, most BoA, I sent my letter of notice and made the next due payments. I never had a loan accelerated under a due on sale clause, never!

Asking for a reduction in rate is, well, lol, probably not possible. Not in an installment deal, now if they are in default you may have a SS or a modification, that's different. If the rate is above market rates at that time, that's the defense against the due on sale clause. When you assume a lower rate than current rates, that's a problem.

If you need a better rate than 7.50%, the price is not right! Instead of discounting the rate, use the current rate as a bargining chip and discount the price to the present value of the loan for a few years! Bill

Stephen,

In a word, no. That is very, very unlikely.

Cole,

You said "I don't think it sounds that crazy to be honest, not in this environment."

With all due respect, I do think it is crazy and unrealistic, even in this environment. There is a contract. Plain and simple. Let's say I am a tenant of yours. I signed a lease and it is 3 months later. I call you up and say, " I don't think I should have to follow the lease terms and want you to lower my rent payment 200 a month because of "this environment." What are you going to say? Sure be my guest. No problem. No, you are going to say pound sand. Why do you expect the bank to do what you yourself will not do? Just saying.

While I understand the fact they are behind and the bank may be better off to take the hit now instead of dragging this out, banks just don't think this way. It is all about the guidelines they have to follow which is based on who owns that particular loan's paper. They don't often do what makes the most sense. After all, the bank negotiators don't lose any money in this deal so they have no motivation to change a system that doesn't affect them. Take it from a former banker in default. Banks are not critical thinkers. They are bureaucratic rule followers and the ones that aren't eventually leave due to no one caring enough about if there are better ways to do things because things are not done that way. Your time is better spent doing other things. Just my opinion only. There are plenty of other homes for sale out there. Don't fall in love with any of them.

If you want to try a short sale and go through that process, that is a whole nother ball game. Only you can decide if the effort is worth the potential reward.

I also feel 7.5% loans aren't the end of the world. Historically, that is a good rate that only seems high now because we are so used to the artificially low rates of the last few years in these unprecedented times of sustained low rates.

Best of luck

Mike C

Steve, I agree with you completely. I've tried it, just that once and it didn't work out. I am sure it can be done though.

Mike, Isn't that called a...loan mod?

They finally have money back from an unperforming asset to loan out again and make interest on. From the payoff if they were to do a SS.

I wasn't talking about a SS I was talking about trying to do a loan modification and then I would take over property Sub2. Like Steve, I have spoken to people who claimed to have done this. No one close to me that I can say with certainty has.

I know guys in my area doing principal reduction loan mod's. I don't think it's crazy or unrealistic.

I think what we can conclude from this thread is:

You can purchase a property Sub2 with a loan mod. Just make sure Mod is done BEFORE purchase and the deal makes sense. There is no shortage of great deals so the time and effort should be WELL worth the return.