A Real Life Example

   How To Create Your Own Mortgage

If you have a typewriter or a computer, you can                          create your own mortgage

There is a huge market of investors who buy privately created mortgages (often referred to as "paper"). Many investors like to buy real estate paper because they can obtain a very good return on their investment. Since the investment is secured by real estate, it is much safer than the stock market.

Your first step is to get an appraisal on the property you own, compare the appraisal of the property to the mortgage you now owe. The difference between what your mortgage is and the appraisal, is the amount you can use
to create your mortgage

Make Your Mortgage Marketable To Sell It Quickly

Therefore, 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); and (4) the yield.

When you structure your mortgage, be generous with the interest rate and yield you offer, and keep the term short. In today's marketplace, if you can offer a 14% to 18% yield (with an adequate LTV).

Keep The Term Short

The "term" of the mortgages you create should be very short, usually 2 to 5 years. You create short-term mortgages for two reasons. First, a short-term mortgage is more attractive to investors. Second, because of the time value of money, a short mortgage is worth more than a long mortgage. Therefore, the faster the mortgage pays off, the less you will have to discount it to produce an attractive yield                                                                                 

IRS code1031

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