Buying a 2nd mortgage ?
Hello,
I'm new to real estate investing. I have a question about preforeclosures.
If you find a house in preforclosure that has a 1st and 2nd mortgage, E.G. 1st mortgage = $148,000 and 2nd mortgage of $22,000, and you are able to purchase the second mortgage at a good discount. What happens when the house is purchased by a new owner? Do you get paid $22,000 ?????
Like I said, I'm a newbie.
Thank You,
Scott
I don't think I understand your question. If you purchase the second mortgage, then you are buying the note. When you buy a note, then you are paying the lump sum and taking all the remaining monthly payments. If it is in preforeclosure, then you wouldn't want to buy the note...the borrower of the note can't make the payments.
If you mean you are purchasing the property at the foreclosure auction because the 2nd is foreclosing, then you will be acquiring the 1st mortgage.
Please elaborate on what you are trying to accomplish so that we can help you better.
Tanya
Tanya,
Thank you for your quick response.
I attended a 1 day boot camp yesterday on preforeclosures. We covered alot of ground and I learned alot, but I still had lots of questions after I got home last night.
My question apparently didn't make sense which shows I have a lot to learn about mortgages and foreclosures. Your response just lets me know that what I was thinking just isn't possible. That's good enough for me.
Thank You,
Scott
swjones1
It dependes upon what the house sells for. Be very carfull buying seconds.
I would consider buying them when in default. But I would would only buy them when the property had equity and I could buy the note very cheap. It would also have to be close to me.
Hi swjones1,
As you study more, you will pick up on some incredbile ways to make money with pre-foreclosures.
Can you make money by buying a 2nd mortgage? Yes and Maybe
The only time I would buy a 2nd mortgage is if I was certain that I could purchase it at a significant discount, and if it still made sense to pay the 1st mortgage a full price (if needed) to acquire the pre-foreclosure.
Here is an example of a transaction that I am currently working on now.
ARV $115,000
1st mortgage $60,000
2nd Mortgage $40,000
In talking with the the first mortgage, they would not discount their note becasue they know that when they foreclose, that they will get all of thier investment back. Through several negotiations with the 2nd, they have agreed to take $5,000 for their $40,000 position. So here is how the transaction looks now.
1st $60,000
2nd $5,000
total $65,000
for a property with an ARV of $115,000. Not bad for a few faxes and phone calls. It you look at your transactions in the right perspectives, it is possible to purchase a 2nd and make a lot of dollars by doing so.
Best of Success!
BAMZ