Improve Your Promissory Note – Early Payoff
1. Early Payoff
Many times a note is paid off in full in advance of the time that it is scheduled to. The average life of a 30 year loan tends to be 7 to 10 years.
2. Early Payoff with a Discount
Offering a small to large discount will many times entice a person to pay a note off early. Example, buy a$10,000.00 note for $6,000.00 and have the payor pay it off for $7,500.00.
3. Early Payoff Refinance (Them)
If the payor doesn’t have the cash, show them how they can finance the property and even lower their payments by taking advantage of the discount that you are offering them.
4. Early Payoff Refinance (Investor)
If the payor of the note lacks the ability to finance the property, you or another investor could finance the property by co-signing for the payor or by taking title, financing and then re-selling to the payor on a wrap.
5. Early Payoff Discount Underlying
You may be able to negotiate a discount on underlying loans as an enticement for an early payoff on your note.
6. Early Payoff Over-finance
By financing more than the amount needed to pay off your note at a discount, the payor may be able to pocket some cash.
7. Early Payoff Over-finance – Invest the Difference
The payor could finance more than the amount needed to pay your note off at a discount and the difference can be invested in some paper. The net result to the payor is a discount on his note and a lower net payment as well as the ownership of some good paper. The result to you would be a profit on your note as well as a commission on the sale of another note to the payor.
8. Partial Payoff Partial Subordination
For a partial payoff on the note the investor could agree to subordinate to new financing. The investor’s yield (rate of return) on the cash investment he has in the note would increase dramatically.
9. Partial Payoff Lower Interest
In exchange for a partial payoff the interest rate and payment could be lowered. The cash investment in the note would have a very good yield.
Improve Your Promissory Note – Restrucure Terms
1. Lower Interest Raise Payment
The payor raises his payment in exchange for a lower interest rate. The investor’s yield increases substantially and the payor saves a great deal of interest charges.
2. Lower Interest Graduate Payment
In exchange for a payment that increases each year, the rate is lowered. The payor saves interest and the investor increases his yield and cash flow.
3. Graduate Payment – Eliminate Balloon
For a gradual yearly increase in the payment, the investor will eliminate a balloon payment, which will also increase his yield.
4. Graduate Payment – Shorten Amortization
The payor may agree to a gradual yearly increase in the payment just for the difference it would make in the length of the loan and the amount of interest it would save.
5. Raised Payment – Pop Balloon
A balloon payment could be eliminated in exchange for a raise in the monthly payment.
6. Raise Payment – Balloon Extension
In exchange for a raise in the payment, the balloon payment could be extended for a longer period of time.
7. Wrap Your Loan
The payor may be in need of cash or may be behind in payments and you can loan the money in exchange for increasing the rate slightly on the entire note.
8. Bad Note – Fix Terms or Clauses
There is a great deal of potential in changing bad terms or clauses of a note. Many undesirable notes can become very desirable with minor modification. Most of the time it is a win-win situation for all involved. If a note has a problem, don’t look at it as a negative point. Could you buy the note and change the clause? Be sure to negotiate before the purchase.
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34 Ways to Improve a Note