Client Paid 17 yrs On A 30 yr Mortgage & Still Owe 80% - How?

49 Replies

I have an extremely motivated client that saw my "CASH 4 HOUSES" sign on my car. He is ready to sell because he has two houses, which translates to 2 mortgages. He is willing to just have the loan paid off or payments taken over. He just wants the stress gone. I told him to get me the exact payoff for the house so we can know the exact number we are working with. Comps put the house at $93-98k. It only needs about $5k cosmetic work. HVAC is 5 years old. 

He says he bought the house 17 years ago for $100k and is paying $810 per month. I asked him how much he owes and he says around $78k. I said," $78k- Is this an Interest Only Loan"? He said "NO". Did you refi or get a second mortgage on the house? He said "NO". 

I told him to get an Amortization so we can see what's going on with this mortgage. He says it's an FHA loan and they are giving him the run around about the amortization. He says that the mortgage has changed hands to 3 banks over the years. Once I get the paperwork I can see what is going on. This guy is open to all creative options because he is stressed about this house and told me that he just wants it GONE.

Has anyone in this forum encountered an issue like this and what was the issue? I also would like to know how to write the contract up so that it reflects that he is open to all options. Do I need to just pick one strategy for the contract and work from there? If he owes the $79k for some reason, what is a good strategy for low equity in a "B"/"C" Neighborhood in Memphis?  

All you need is the interest rate he's paying, and you can enter the loan amount, the interest rate, and 30 years in any mortgage program to find out the amortization...month by month...and the numbers you gave here seem in line.

30 yr amortized mortgages are front loaded with interest.  You don't start to make a dent in the principle until around the 20th year.

In 2000-1 a great rate was about 6.75%. Recent rates in the 3s and 4s amortize down much faster. Fha loans also have MIP forever.

One of the big reasons I like 15yr loans is the amortization.  When I'm done, the 30yr loans still have about 70% to go.  

Hello and welcome to this site Michael!  I am convinced that the typical Bank is there to mislead their actual intentions.  Their main goal is to make them sound marvelous.  They are trained about how to mislead you and make money off of your deposits.  They will never show you anything negative.  The amortization of a home loan is very misguiding and never is properly described as the liability it is.  The main goal is to loan you the maximum amount which makes them the most money.  They have contributed to our brainwashing that occurs when we are growing up.  We are taught to believe everything they say.

A "lease option" loan could help him and the other person that has already been turned down for a bank loan in spite of their work and ability to pay.  If he just wants to get out of the deal, I completely understand.  Even though the IRS considers it as an asset, it is really a liability.  The financial planners are trained the same way and only shows you positive things.  Good luck to you!

Originally posted by @Michael Williams :

I have an extremely motivated client that saw my "CASH 4 HOUSES" sign on my car. He is ready to sell because he has two houses, which translates to 2 mortgages. He is willing to just have the loan paid off or payments taken over. He just wants the stress gone. I told him to get me the exact payoff for the house so we can know the exact number we are working with. Comps put the house at $93-98k. It only needs about $5k cosmetic work. HVAC is 5 years old. 

He says he bought the house 17 years ago for $100k and is paying $810 per month. I asked him how much he owes and he says around $78k. I said," $78k- Is this an Interest Only Loan"? He said "NO". Did you refi or get a second mortgage on the house? He said "NO". 

I told him to get an Amortization so we can see what's going on with this mortgage. He says it's an FHA loan and they are giving him the run around about the amortization. He says that the mortgage has changed hands to 3 banks over the years. Once I get the paperwork I can see what is going on. This guy is open to all creative options because he is stressed about this house and told me that he just wants it GONE.

Has anyone in this forum encountered an issue like this and what was the issue? I also would like to know how to write the contract up so that it reflects that he is open to all options. Do I need to just pick one strategy for the contract and work from there? If he owes the $79k for some reason, what is a good strategy for low equity in a "B"/"C" Neighborhood in Memphis?  

 Here's what I have to put in to get close to the numbers you specified:

35 year fixed rate mortgage, 5% down, 10% rate, 2001 vintage. 

EDIT: Ignore the top right portion. 

I assume his monthly payment include taxes and insurance, etc.

Say $100,000 (maybe he financed closing costs, psi) I get:

At 6.5%, $632/mo P&I, $63,000 balance at exactly 17 years.

You need to see his actual statement.

I have had similar numbers at least 3 times in the last year. The sellers I dealt with had been delinquent several times and the mortgage company was paying the taxes and insurance and adding those expense along with attorney fees to the mortgage. 

I bought one last week. The seller bought it in 2006 for 126,500 with an 80/20 mortgage. She owed 132,000 last week. The nice thing was that the loan had been modified twice and she was only paying 2% interest. 

Banks provide the rope. It’s up to the borrow to pull themselves up or tie a noose. 

Originally posted by @Joe Villeneuve :

All you need is the interest rate he's paying, and you can enter the loan amount, the interest rate, and 30 years in any mortgage program to find out the amortization...month by month...and the numbers you gave here seem in line.

30 yr amortized mortgages are front loaded with interest.  You don't start to make a dent in the principle until around the 20th year.

 
Thanks Joe, that make sense. I just found out this guy lost his job today, so his motivation probably just jumped by 10. 

Originally posted by @Michael Lee :

Hello and welcome to this site Michael!  I am convinced that the typical Bank is there to mislead their actual intentions.  Their main goal is to make them sound marvelous.  They are trained about how to mislead you and make money off of your deposits.  They will never show you anything negative.  The amortization of a home loan is very misguiding and never is properly described as the liability it is.  The main goal is to loan you the maximum amount which makes them the most money.  They have contributed to our brainwashing that occurs when we are growing up.  We are taught to believe everything they say.

A "lease option" loan could help him and the other person that has already been turned down for a bank loan in spite of their work and ability to pay.  If he just wants to get out of the deal, I completely understand.  Even though the IRS considers it as an asset, it is really a liability.  The financial planners are trained the same way and only shows you positive things.  Good luck to you!

That's the route I want to go but this is a flip to an investor that has more clout than me. I've never done a lease option before but I do understand the concept. I also know that getting a large upfront fee from a stable lease to own tenant will be easy but I'm worried about the FHA loan. They have already told him that he can't have to mortgages or he will be classified as an investor; so I don't know the strategy for getting around that issue, so that's why I think it's better to flip this one.

Originally posted by @Wayne Brooks :

I assume his monthly payment include taxes and insurance, etc.

Say $100,000 (maybe he financed closing costs, psi) I get:

At 6.5%, $632/mo P&I, $63,000 balance at exactly 17 years.

You need to see his actual statement.

 He was in the process of getting his paperwork to me then he got fired today. So I am trying to gage when I should call him about this deal. I think he will be calling me first. 

He said his was at 6% and include taxes and insurance. 

Originally posted by @Brian Gainous :

I have had similar numbers at least 3 times in the last year. The sellers I dealt with had been delinquent several times and the mortgage company was paying the taxes and insurance and adding those expense along with attorney fees to the mortgage

I bought one last week. The seller bought it in 2006 for 126,500 with an 80/20 mortgage. She owed 132,000 last week. The nice thing was that the loan had been modified twice and she was only paying 2% interest. 

Banks provide the rope. It’s up to the borrow to pull themselves up or tie a noose. 

 
Would you mind telling me your strategy for this one?  I am referring to your deal. 

Originally posted by @Chris Mason :
Originally posted by @Michael Williams:

I have an extremely motivated client that saw my "CASH 4 HOUSES" sign on my car. He is ready to sell because he has two houses, which translates to 2 mortgages. He is willing to just have the loan paid off or payments taken over. He just wants the stress gone. I told him to get me the exact payoff for the house so we can know the exact number we are working with. Comps put the house at $93-98k. It only needs about $5k cosmetic work. HVAC is 5 years old. 

He says he bought the house 17 years ago for $100k and is paying $810 per month. I asked him how much he owes and he says around $78k. I said," $78k- Is this an Interest Only Loan"? He said "NO". Did you refi or get a second mortgage on the house? He said "NO". 


I told him to get an Amortization so we can see what's going on with this mortgage. He says it's an FHA loan and they are giving him the run around about the amortization. He says that the mortgage has changed hands to 3 banks over the years. Once I get the paperwork I can see what is going on. This guy is open to all creative options because he is stressed about this house and told me that he just wants it GONE.   

Has anyone in this forum encountered an issue like this and what was the issue? I also would like to know how to write the contract up so that it reflects that he is open to all options. Do I need to just pick one strategy for the contract and work from there? If he owes the $79k for some reason, what is a good strategy for low equity in a "B"/"C" Neighborhood in Memphis?  

 Here's what I have to put in to get close to the numbers you specified:

35 year fixed rate mortgage, 5% down, 10% rate, 2001 vintage. 

EDIT: Ignore the top right portion. 

 
I knew banks made lots of money off of loans but seeing it on paper just boggles my mind. When I looked at my Amortization for my house I didn't know what I was looking at during that time. Know that I understand it more and I see why banks hate crypto and smart contracts so much; it will cut out trillions of dollars for them. 

Originally posted by @Michael Williams :
Originally posted by @Chris Mason:
Originally posted by @Michael Williams:

I have an extremely motivated client that saw my "CASH 4 HOUSES" sign on my car. He is ready to sell because he has two houses, which translates to 2 mortgages. He is willing to just have the loan paid off or payments taken over. He just wants the stress gone. I told him to get me the exact payoff for the house so we can know the exact number we are working with. Comps put the house at $93-98k. It only needs about $5k cosmetic work. HVAC is 5 years old. 

He says he bought the house 17 years ago for $100k and is paying $810 per month. I asked him how much he owes and he says around $78k. I said," $78k- Is this an Interest Only Loan"? He said "NO". Did you refi or get a second mortgage on the house? He said "NO". 


I told him to get an Amortization so we can see what's going on with this mortgage. He says it's an FHA loan and they are giving him the run around about the amortization. He says that the mortgage has changed hands to 3 banks over the years. Once I get the paperwork I can see what is going on. This guy is open to all creative options because he is stressed about this house and told me that he just wants it GONE.   

Has anyone in this forum encountered an issue like this and what was the issue? I also would like to know how to write the contract up so that it reflects that he is open to all options. Do I need to just pick one strategy for the contract and work from there? If he owes the $79k for some reason, what is a good strategy for low equity in a "B"/"C" Neighborhood in Memphis?  

 Here's what I have to put in to get close to the numbers you specified:

35 year fixed rate mortgage, 5% down, 10% rate, 2001 vintage. 

EDIT: Ignore the top right portion. 

 
I knew banks made lots of money off of loans but seeing it on paper just boggles my mind. When I looked at my Amortization for my house I didn't know what I was looking at during that time. Know that I understand it more and I see why banks hate crypto and smart contracts so much; it will cut out trillions of dollars for them. 

 You really don't want to know how the banks do it.  Suffice to say they are the best examples of how to use/apply what Einstein referred to as "the greatest invention of the 10th century".

Compound Interest.

What he said after that was the Gold. He said, "...and, those that understand it will live off of those that don't". I apply this "Golden Statement" to my REI all the time.

We make a 20+% net return on the home and find fault in the banks for making 5% gross return (excluding expenses, their cost of funding, and defaults)?  The bank is getting the short straw here.  Let's not find fault with low cost leverage and the lenders (our business partners) who provide it.

@Mike Dymski the general public is mostly convinced by the media, who Is In the busIness of catetIng to Ignorants, that the banks love to foreclose on property and own homes. Trying to convince people of economic realities is a losing proposition. Fortuantly most of the BP crowd is more knowledgeable

He should be able to put the home into a "land trust" and keep the FHA Loan on it, even tho he has another FHA Loan on his other property, once in a land trust it could be sold "Subject to the existing mortgage" which gives an investor the ability to rent it out or even "rent to own" if rental rates support it.

The land trust protects the mortgage from being accelerated, or the "due on sale" clause most FHA loans have, however I never heard anything about FHA saying you can't have 2 FHA loans, in fact I've only heard that they allow a total of 10 FHA Loans, as a maximum.

If you are looking at it as a rental, buying it at 78k, and 5k+ renovation for rental, you could offer 5k cash and take over this loan, or just to take over the loan sans 5k cash.  Putting it in the land trust allows you to become the beneficiary, and as long as those mortgage payments are made the house is yours, and then you could refinance out into a better loan later.  The protection for him is that if you stop making those payments, he keeps the house, and any cash/mortgage payments made.

If the numbers make sense, then definitely talk to a local RE Attorney about “subject to” property acquisition.

@Kevin Arnold  

You have some misinformation......

You can only have one fha loan at a time, unless you meet one of the exceptions such as moving for work, family size increase, etc. It’s Fannie where you can have 10 loans. 

Putting title into a land trust does Not prevent the due on sale clause, it simply tries to mask it, and not so well as lenders are well aware of the game. 

In a sub2, the seller doesn’t just “get the property back” if the buyer defaults.....title changed hands, the seller has no mtg with the buyer to foreclose on.....the seller is simply screwed. 

Originally posted by @Kevin Arnold :

He should be able to put the home into a "land trust" and keep the FHA Loan on it, even tho he has another FHA Loan on his other property, once in a land trust it could be sold "Subject to the existing mortgage" which gives an investor the ability to rent it out or even "rent to own" if rental rates support it.

The land trust protects the mortgage from being accelerated, or the "due on sale" clause most FHA loans have, however I never heard anything about FHA saying you can't have 2 FHA loans, in fact I've only heard that they allow a total of 10 FHA Loans, as a maximum.

If you are looking at it as a rental, buying it at 78k, and 5k+ renovation for rental, you could offer 5k cash and take over this loan, or just to take over the loan sans 5k cash.  Putting it in the land trust allows you to become the beneficiary, and as long as those mortgage payments are made the house is yours, and then you could refinance out into a better loan later.  The protection for him is that if you stop making those payments, he keeps the house, and any cash/mortgage payments made.

If the numbers make sense, then definitely talk to a local RE Attorney about “subject to” property acquisition.

No.  Putting the property into a trust DOES NOT protect it from the bank's rightful ability to accelerate the mortgage.  All it does is help obfuscate the fact that the property ownership has transferred.  However, if the bank is actually on top of things and sees the transfer, they absolutely can accelerate the loan.

Buying any property Subject To presents the risk the bank/lender will accelerate the loan, unless you have written agreement from the lender or the original loan does not include an acceleration clause due to the transfer of ownership.  

Does that mean you shouldn't do a Subject To deal? No. It just means you need to understand the realities and risks, however small they may be. And, as long as the mortgage is getting paid on time and the insurance is current, the risk is small. Why? Because banks/lenders are not in the business of owning property. In fact, the big banks basically suck at it, and they already own a ton of them. A performing loan makes money. REO properties cost banks money. The one thing banks are generally good at is math. Turning a performing loan into a non-performing REO asset isn't good math.

@mike Dymski I am well aware that banks WERE not interested in foreclosing on you but I think that is changing. They are creating a situation that allows them to get the house paid for and then sell the MERS asset to servicing companies. How do I know? ...They did my residence. The new game is to get you to apply for a modification. They tell you not to pay until the modification is complete. If you send a payment they will send it back. The goal is to get you to the 90 day default date by delaying the modification process. After 90 days the mortgage insurance is going to pay the house off, then they sell the note to servicing companies

@Kevin Arnold I will most definitely look into that approach. From my research on this so far it would be best to have an attorney advise me on this strategy.  

Thanks for that other info as well. 

I bet 90% of home owners couldn't tell you how much they owe on their house, what the current value is, and what interest payment they are even paying. This seller is either misinformed, mistaken, or flat out lying. There is definitely some information missing. That loan would have to be at about 11% to still owe $78k. 

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