Max Allowable Rate On 2nd Mortgage
Hi everyone! I'm in Missouri and considering helping out a neighbor with some consulting that I normally do for a fee. However, my neighbor can't afford to pay me anything now. He offered to pay me with a 2nd mortgage on his house. It sounds good, but instead of holding the note and collecting those small interest payments, I'd rather just sell the note. In order to entice a potential buyer, I want to charge a decent amount of interest. The usury amount in Missouri is, currently, 7.9% (much too low for what I need). However, Missouri Revised Statute 408.232 states:
408.232. 1. With respect to a second mortgage loan, any person, firm or corporation may charge, contract for, and receive interest in any manner at rates agreed to by the parties computed on unpaid balances of the principal for the time actually outstanding.
Does this mean I can charge something much more reasonable considering my needs and risk (like, say, closer to 20%)?
Please help, if possible. Thanks in advance!
Yes, pretty much. You can charge whatever you want. Most second's with mortgage lenders are at rates of anywhere between 9-13%. With hard money lenders its usally about 12-18%... I think you would fall in the category of like a hard money lender range. 20% I believe is getting a little too excessive... that is just my opinion however.