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Several years ago I sold the beneficial interest of a trust to an elderly lady.
She wants to do a reverse mortgage to reduce/eliminate her mortgage payment.
The problem is the reverse mortgage company will only lend at 70% of the appraised value and $22,000 short of what she owes me.
I could take back a 2nd but… if she passed away, then the reverse mortgage has to be paid off within a year or the heirs lose the house and my 2nd would get wiped out.
My guess is the heirs would walk away and I’d lose the house and the $1000 a month cash flow it is producing. I sure would not want to refinance a reverse mortgage to protect my position.
So, I agreed to take back a 2nd but I want it secured my a Mineral Deed and as Assignment of an Oil and Gas Lease the elderly lady owns.
If they pay on time, they keep the Oil and Gas Lease. If they don’t pay on time, I get the Deed to the Minerals and the Oil and Gas Lease ( and those payments)
This collateral is a bigger incentive for them to pay on time and I would not mind getting that collateral.
I could get the house as collateral too.
When taking back a 2nd, you don’t have to use the subject property as collateral. Get something as collateral you don’t mind getting if the payments are not made.
The value of the collateral does not have to match the value of the note. Get as much collateral as you can to improve your chances of getting paid on time.
Jackie
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