WLCCI

On this one you would create a promissory note and mortgage on the existing equity you have in an asset (home, boat, investment property, automobile, vacant land, etc) and use it as a down payment on another property. Equity is the value of the property minus any mortgages or liens.

Assume that you located a two family property that is on the market for $60,000 with an existing $25,000 mortgage. Therefore, the seller’s equity is $35,000. You now create a promissory note and mortgage in the amount of $15,000 secured by equity in one of your assets.

Use that as a down payment on the two family property and ask the seller to take a $45,000 wrap-around mortgage for the balance. When you buy the two family property, you will immediately have $15,000 equity in the property because of the $15,000 down payment.

The mortgage that you are creating on your asset should have a substitute of collateral clause, allowing you to later move that mortgage from your asset to another property where you have equivalent or greater equity.

Thus, you might use equity in your own home to buy investment property “A”; your equity in “A” to buy “B”; your equity in “B” to buy “C”; and then, by the substitution of collateral clause, move the mortgage from your own personal residence to your most recent purchase, property “C”.

If the seller of the two family property, property “A”, is concerned about not receiving any cash at the time of closing, the note and mortgage can be converted into cash by selling them to someone else.

Read More On Creative Financing :

1. Creative Financing one
2. Creative Financing Two
3. Creative Financing Three
4. Creative Financing Four
5. Creative Financing Five
6. Creative Financing Six
7. Creative Financing Seven
8. Creative Financing Eight