Subject 2

[Jason McBride]

What i am curious on is what do you do if the finance company calls the loan due. From the reading i have done in Wendy Patton's book banks can do that but they haven't because the intrest rate is so low. I have already decided that when i start investing in subject tos, after i talk with a local lawyer about some legal issues, i will be sending a letter to the lender informing them. Do you do this? Do you recommend this?

[Nick J.]

Jason, Jon, is right. If they do call it due then you will need to satisfy the loan by either re-financing into your own name or selling the property. The reason why you buy right is incase this happens you're not left with the bag and you certainly don't want to let it foreclosure and affect the mortgagee adversely.

Don't be so quick to think they will call the loan due if interest rates jump up either. You have to understand why they would even bother you to begin with.

Are you making the payments on time?
Is the property insured properly?

The banks are making money from you making the payment on time, every time. The only reason why they would call it due because of the interest rate is if they notified you that they will accelerate the loan IF you don't re-finance with them at a higher interest rate.

They don't want to call it and miss out on all the 'interest' they'll be collecting. If they accelerate the loan, they're only going to make more money if the new purchaser uses that particular bank for the new financing at a higher rate. If not, they're not making any more money and the cost of accelerating the loan and essentially getting paid off 'not a short sale' but short of the potential amount made from keeping the loan to term.

I do usually notify the bank but in a subtle way to not draw a lot of attention to me. Some 'gurus' will tell you to keep the current insurance in the sellers name and get new insurance in your name. I say why mess with 2 insurance companies when their first job is to deny claims and save as much money as possible. I cancel the existing insurance and place my own insurance and I always get the right insurance because this is not the time to skimp out and try to save a buck or two.

When I have my agent send the lender notification of insurance changes(or whatever their official term for that is) I also have them include a letter stating that I'm the one insuring because the seller is selling the property to me with 'some' owner financing and that they will see that they are still fully protected per their requirements.

If you go through some of my old posts, you'll actually find the exact letter/wording I use when I have that letter sent.

As for your recommendation, I would not send them a separate letter stating you are buying it sub2 but at least notify them of 'some' seller financing once they receive the new insurance info.

I hope this was of some help, if it was, don't forget to vote it up :)