Hello smart people of BP...I had a question regarding my note with my lender. I have a private lender who just helped me snag my first deal and we were talking on the phone the other day about how he could possibly sell that note for a profit. My question is...will this affect me in any way? Right now it's around 100 grand at 3% for a 30 yr fixed rate. I told him I'd most likely re-finance in a year to get him his money back. If he were to decide to sell that note before I pay him back, would this affect me in any way?
My thoughts are, if he sells the note to another lender, I'd get him his money back, he may end up making about 5 grand extra...and I wouldn't have to go to the bank and re-finance. Good or bad decision?
Thanks in advance!
The terms of the loan don't change with a sale. So should be no impact to you from that perspective.
Agreed, it won't change at all. But I think your lender is going to find out he'll be selling at a discount, not a profit.
...I agree with Wayne he will be selling at a discount. Not sure who would buy that for a premium.
The only thing that would change for you is where you send your payments. Good or bad, there is absolutely nothing you can do about him selling the loan to someone else, other than to pay it off.
Thank you all for the responses. I'm glad it won't affect me at all.
@Jordan Higley , I would be in no rush to refinance. A 3% loan amortized over 30 years is a terrific deal for you, the borrower. One that leads me to question, however, why a private lender would have offered it?
I agree with @Jim Farrell , if he is loaning you money at 3% for 30 years why aren't you doing more deals with him? Keep him happy and find more deals to take advantage of that rate!
I skipped past "30 year 3% fixed". He's definitely going to have to take a discount if he wants to sell.
There is no way he is going to sell at a profit, in fact he would have to sell at a pretty big discount.
The only reason I could see him selling would be he needed the cash which could be an opportunity for you. Is the loan for 30 years at 3% with no balloon ? Due on sale clause ? If no balloon or do on sale clause(Not Likely) this loan would have HUGE value for you to wrap at some point when interest rates rise
Or....How long do you intend to own the property ? If you are planning on selling in the near future you could take advantage of the discount he would give a note investor and refi and reduce your principal balance. This would only benefit you if you are selling in the near future. Be sure to weigh in the cost of the refi and increase in interest
Or....Refi and soon as you can so he can loan you more money to buy an investment property !
Better yet......send me his number and I will borrow all his money at 3% !! ;)
@Jordan Higley You have been gifted an amazing opportunity.
I would RUSH to refinance, but only if the seller would sell to YOU at a discount.
100k at 3% for 30 years and you should have a current payment of $421..60
A note buyer will want, assuming you have paid on time, and have stelar credit and 20% equity in the property, 8% . To get that the note buyer would offer $57,458.67.
Even if they would take 7% they would only pay $63,370.28.
Offer to buy him out for 65k and get an instant 35k in equity, not bad for a days work. Too, with a 65k balance you will have 20% equity so should be able to qualify for a good rate with no PMI, if you refined that amount at 5% (high in my opinion) Your payment would drop to $$348.93.
Don't let this opportunity slip away. Make sure there is no balloon on your payment as that changes the value to an investor (up). Make sure your seller is not trying to buffalo you into doing a refi and taking him out at full value.
If he refuses to sell to you contact the new borrower right after closing and offer them a few thousand over what they paid, chances are they will take it and you will come out ahead.
Privately initiated 100K loan at 3%, 30 year fixed for a RE investors first deal.
There has to be more to the story. Simplest is that the lender is a friend or family.
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