How to Create your own Mortgage

Using your computer; or typewriter, you can create your own mortgage

There is a large market for real estate (notes, mortgages, paper)

Investor's purchase privately created real estate notes, mortgages, and paper because they purchase at a discount giving them a good rate of return or high yield on their investment.

Since the investment is secured by real estate, in most cases it is much safer for an investor than the stock market.

The first step is to determine the value of your property, getting a certified appraisal on the property is necessary to show the value of your property.

You know what the present mortgage and encumbrances are, you subtract the total from the appraisal, which in turn gives you the equity you have to work with.

Example:

Value                                    =   $220,000.00

Mortgage & encumbrances = $165,000.00

Equity                                   =   $65,000.00

Note could be $65,000.00

Create Your Mortgage To Sell It Quickly (Marketability)

The primary concern in structuring your mortgage is to make it "marketable" to the investment community
so you can sell, or exchange it quickly.

Four factors affect marketability:

(1) The interest rate
(2) The term
(3) The loan-to-value ratio (LTV)
(4) The yield the investor is looking to receive

When you structure your mortgage, be generous with the interest rate.

A low interest rate does not necessarily make the loan more attractive, remember the interest rate determines the amount of the monthly payment or income stream, which is what the investor is actually buying.

It doesn't matter if you are selling the entire mortgage or a portion (2-3-5) years of the mortgage;
the monthly payment (income stream) is what the investor is buying.

Example:

Principle - $38,000 - Term - 20 year - Interest rate - 10% = Monthly payment $366.71

Balloon 36 months ( $35,909.11 )

36 payments of $366.71 = $13,201.56 + Balloon of $35,909.11 = $49,110.67

Keep The Term Short by using a balloon

When you create the terms of the mortgage, you amortize the loan for 20 or 30 years to keep the monthly payment reasonable for you.

To make it attractive for an investor you create a balloon usually 2 to 5 years.

In the example above you can see the payment is reasonable.

With the three (3) year balloon an investor will receive $13,201.56 of payments or income stream and then $35,909.11 at the end of 36 months.

A total $49,110.67 in three short years.

This makes it great for you.

It is a fantastic investment for an investor because of the time value of money.

You should sell the note quickly by creating an attractive yield for the investor.