I am a bit confused by this statement "I would end up with a 140k mortgage with 80k equity in the other home" it sounds like you want to carry back your carry back to her. Which would be beneficial to you but would leave her out to dry because technically she would not own a home the paper holder would.
Creative option that require a huge amount of trust from your friend-
Do it on a handshake
You could use hard money to buy out your house
It will cost you points and a percentage but they usually only pay 80% of ARV that is why it barely pencils out. To pay off the carry back. Then she could sell you her house for $1 and fees.
You acquire the home finance it and pay off the hard money and sell her your house for $1
you moved up in equity-hard $ costs and fees on a home, and you both get what you want.
The banks and hard money lenders utilize comps for value property so your 1000 sq/ft and land probably is not worth as much with financing. That is why it was sold to you with a owner carry loan.
Hard money costs, fees, etc can quickly add up you must pencil in hold time for the loan and if this is actually going to work YOU HAVE TO KNOW THE VALUES OF THE HOMES exactly which if people are telling you it does not pencil out sounds like your numbers are off.
Or vice versa you use hard money to buy her home for a reduced amount she then uses the money from the sale to buy out your place and you finance the new home and pay off the hard money.
Again hard money is expensive so know the values of the homes and calculate points fees and holding costs subtract that from the ARV of her home and that will be your equity.
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