1st deal loan modification help

[Marcus Griffin]

I purchased a home sub2 that was a pre foreclose. The bank is offering 2 options for modification. I pay $14k and keep 3.5% interested rate and $1900 payment or no upfront payment put interest go to 7% with $2500 payment. Plan is to cash flow property as airbnb. Please advise?

[Clayton Silva]

What is the total loan amount?  What is the value of the home? What is the expected income of renting it on Airbnb? What is your goal (to keep more cash on hand, or to have more cash flow)?  What are the operating expenses of running the Airbnb? Are you hiring a manager, if so what do they charge?

[Wale Lawal]

@Marcus Griffin

Option 1 offers a lower monthly payment and lower interest rate for a subject-to property loan, but requires a $14k upfront payment, potentially affecting liquidity for property improvements or investments. Option 2 has a higher monthly payment and higher interest rate, potentially straining finances during slower months or vacancies. Option 1 is better for maximizing cash flow and recovering investment within 23 months.

Good luck!

[Chris Seveney]

@Marcus Griffin

Typically as part of a modification the bank will have a “shock package” which includes information and forms to be completed by the borrower

On those forms there are questions like will they or do they occupy the property, there income, do they plan on keeping th home.

This is equivalent to lying on a bank application which is most likely considered fraud

Not providing legal advice but this is definitely a very slippery slope you are getting involved in.

[Jonathan Greene]

1. Listen to @Chris Seveney

2. Don't buy a pre-foreclosure Sub-To

3. If you don't want to do 1 or 2, see below.

I think you are playing with fire right now. They gave you two options that both work out great for them and are not ideal for you because they are a bank. If you know how to Airbnb and know your expected return and have to choose legally from these two options, I think the first is better.

[Daniel Tanasa]

Quote from @Marcus Griffin:

I purchased a home sub2 that was a pre foreclose. The bank is offering 2 options for modification. I pay $14k and keep 3.5% interested rate and $1900 payment or no upfront payment put interest go to 7% with $2500 payment. Plan is to cash flow property as airbnb. Please advise?

 Hello Marcus,

I assume you already have experience with sub to and you know what you're doing in dealing with the bank for the loan modification. As it was mention before you're walking a thin line when taking a house sub to and then dealing with the bank to do modifications. You want to make sure the seller is willing to get involve all the time they are asked by the bank to do so. 

As for the 2 options I think option 1 is a much better option long term. You will recover your money in 23 months, so if you plan to hold the property longer than that, that's the way I will go. Also, in todays landing environment you can't buy a 3.5% interest with only 14 k paid in points, so again, since you have that option with the sub to I will take that all day. 

Good luck. Let us know how it goes and the way you ended up going with. 

[Marcus Griffin]

Quote from @Daniel Tanasa:

Quote from @Marcus Griffin:

I purchased a home sub2 that was a pre foreclose. The bank is offering 2 options for modification. I pay $14k and keep 3.5% interested rate and $1900 payment or no upfront payment put interest go to 7% with $2500 payment. Plan is to cash flow property as airbnb. Please advise?

 Hello Marcus,

I assume you already have experience with sub to and you know what you're doing in dealing with the bank for the loan modification. As it was mention before you're walking a thin line when taking a house sub to and then dealing with the bank to do modifications. You want to make sure the seller is willing to get involve all the time they are asked by the bank to do so. 

As for the 2 options I think option 1 is a much better option long term. You will recover your money in 23 months, so if you plan to hold the property longer than that, that's the way I will go. Also, in todays landing environment you can't buy a 3.5% interest with only 14 k paid in points, so again, since you have that option with the sub to I will take that all day. 

Good luck. Let us know how it goes and the way you ended up going with. 

Im leaning towards the 3.5% rate. Who knows if they will ever get that low again.  I wanted to maybe invest that money elsewhere. But the 3.5% is way more value than the 14k. Im going to keep the house at least 5-7years

[Daniel Tanasa]

Quote from @Marcus Griffin:

Quote from @Daniel Tanasa:

Quote from @Marcus Griffin:

I purchased a home sub2 that was a pre foreclose. The bank is offering 2 options for modification. I pay $14k and keep 3.5% interested rate and $1900 payment or no upfront payment put interest go to 7% with $2500 payment. Plan is to cash flow property as airbnb. Please advise?

 Hello Marcus,

I assume you already have experience with sub to and you know what you're doing in dealing with the bank for the loan modification. As it was mention before you're walking a thin line when taking a house sub to and then dealing with the bank to do modifications. You want to make sure the seller is willing to get involve all the time they are asked by the bank to do so. 

As for the 2 options I think option 1 is a much better option long term. You will recover your money in 23 months, so if you plan to hold the property longer than that, that's the way I will go. Also, in todays landing environment you can't buy a 3.5% interest with only 14 k paid in points, so again, since you have that option with the sub to I will take that all day. 

Good luck. Let us know how it goes and the way you ended up going with. 

Im leaning towards the 3.5% rate. Who knows if they will ever get that low again.  I wanted to maybe invest that money elsewhere. But the 3.5% is way more value than the 14k. Im going to keep the house at least 5-7years

I think that's the right decision!