Owner Financing Balloon Payment HELOC?

[Lawrence Potts]

Hello BP members,

I am looking for information regarding owner financing and title transfer when facing a pending balloon payment. My understanding is that one would simply cash-out refinance right before the balloon payment is due and pay off the owner finance balance and then begin making payments toward the refinance note, or establish a HELOC. However, my assumption is that most, if not all, owner financing contracts do not hand over the legal title until AFTER the final payment has been made. Therefore, refinancing or using a HELOC from the property is not an option to pay the balloon payment because there needs to be a legal title that the bank or credit union can use as collateral in the event that money is owed and not paid.

Does this mean that if I were to hypothetically be in a negotiation with a seller and they want to have a balloon payment after 5 years on a 30 year amortization that I would need to ensure that the legal title is transferred to me at the down payment and not until after the final payment? Or would I need to find funding from elsewhere to pay off the balloon? If I had this property as well as other properties in an LLC, could I refinance one of the properties to pay off the balloon?

Please comment and help me understand this or if I am misunderstanding any information. Thank you!