OWED TO YOU
If you have ever sold a home and there is money still owed
to you, you have a ready source of cash. As
we mentioned in the first financing method, a lender does not want your down payment to be borrowed; unless it
is borrowed against an asset. Money
owed you is considered an asset and if it is secured by a tangible property,
whether a car, house, or whatever, the note (money owed to you) can be used as
collateral for a cash loan which you can then use for your down payment.
The amount you can borrow is determined by mainly three factors.
1) The amount that is owed you.
2) The amount that is paid to you monthly towards the outstanding
3) How much time is left before the balance owed you is paid off.
lender will generally lend an amount that, if amortized for the same amount of
time that is left on the money
that is due you, creates a monthly payment that is equal to the payment you are
receiving. In other
words, let's say that last year, you sold your home that was worth $100,000
dollars. The buyer gave you $5,000
dollars down and assumed the $60,000 you still owed.
You "carried back" a second mortgage for $35,000 payable within
five years with interest only payments of $350 per month.
The lender would determine the amount he would lend
you as follows:
1. He would determine that since you sold the property one year ago, the loan will be paid off in four years.
2. He would take note of the
fact that you are receiving $350 monthly.
3. He would go to his loan
tables to determine what amount of money $350 would pay off if amortized over
four years at the current rate of interest.
In this case, we will assume that their interest
rate is 14%. Upon taking all this information into consideration, the lender
would write you a check for $12,806.44.
Now, I know that chances are that this section was a
little confusing. But unless you
have a substantial background in finance that is to be expected. However,
what is important here, is that you understand fully, this concept.
have an asset, there is a way to turn it to cash.
The beauty of this particular method is that you can raise the
money you need without liquidating any of your assets.
Plus, you make the payments on the money you borrowed, by using the
payments received from the money you are owed.
Although, you probably don't have the loan and finance tables required to determine exactly the amount you can borrow with this method, all you need to do is go to your nearest bank with the information on the loan you are planning to borrow against and any loan officer can tell you within about ten minutes exactly what they can do for you.