What is the most important thing in ANY real estate market – Getting the Deal Done! There is a financing technique known as “All Inclusive Deed of Trust” (AIDT), also called a Wrap Around Loan that can be just what you need to get the deal done.
To put it simply an AIDT takes a preexisting loan and absorbs it into a new loan. The new loan is made by the seller of the property to the new owner. DISCLOSURE – THE LEGALITY OF THIS IS DIFFERS BY STATE AND THE PREEXISTING LOAN.
Example: I’m selling a property for a total of $300,000, and there is an existing mortgage on the property that has a balance of $250,000, with an interest rate of 6.5 percent. I’ve found a buyer who wants the property and is willing to put $30,000 down, but the buyer had a short sale three years ago and is having a hard time qualifying for a loan with a conventional lender. The buyer now has a good job, has proven they are credit worthy and can afford the property. So, as the seller, I decide to sell to them and use an AIDT to facilitate the financing. I create the AIDT for $270,000, with an interest rate of 7.5 percent. This means the AIDT is wrapped around the existing mortgage of $250,000. The buyer now gives me the $30,000 cash down payment and makes loan payments to me and I continue to make the payments to the bank on the $250,000 mortgage. I’m now making 7.5 percent on the $20,000 and one percent on the $250,000.
There are many benefits of an AIDT. It creates flexibility and the ability to negotiate all of the terms of the deal, including the payment, interest rate, maturity date, late charges, and prepayment penalty.
If the original mortgage includes a “due on sale clause” then the creation of an AIDT will require both legal and tax counsel in order to create a legal and practical AIDT.
Here are some of the steps to follow when creating an All Inclusive Deed of Trust:
- Make sure you have all the relevant information regarding the existing loan, such as the payments, the interest rate, the date of maturity, the balance of the loan, and any other additional terms of the loan.
- Execute an all inclusive deed of trust in your favor with the same terms that are used by the original loan except for the interest rate.
- Manage the rest of the transaction as though it was a standard loan; do a credit check, verify funds, have references and so forth.
- Use a servicing company to accept the payments from the buyer and pay the original loan. In this way you won’t be personally involved.
- Also consider having a note buyer review the terms of the note so you’ll know the marketability of the note if you need to sell it.
An AITD can also be a very powerful tool when marketing the property. In today’s environment there may be buyers who will be worthy to own property but who may have been through a difficult time and will need a little help getting back into the market.
This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
Discover how to make money in forex is easy if you know how the bankers trade!
5 Forex News Events You Need To Know
In the fast moving world of currency markets, it is extremely important for new traders to know the list of important forex news...
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and...
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.