I just had a recent investor of mine contact me about a land note he was paying on. He was paying $300 month with 11% interest on a note with a principal balance of $39,000. Well, the seller never informed him that he was in a negative amortization situation on his note. That is, with each payment he was only paying towards interest and the principal amount never changed. If you look at an amortization chart for this loan he should have been paying $371 / month over a 30 year period and then by the end of the term he would be fully amortized and the note completely paid off.
What bothers me about this (besides being illegal as it violates the truth and lending law), is the fact that the seller knew the situation and easily could have simply changed his note by either lowering the interest rate or the principal amount so his $300 payment would fully amortize.
The crazy part of this story is my investor had been a fabulous customer and had paid in over $8,000 towards his note and then receives a statement his principal balance is $39,200!!! I hope he gets that money back, but the lesson learned here is before you enter into any land contract with owner financing click on the link below to double check the seller’s note and insure you are being fully amortized.
This is off subject, but if you have kids or grandkids you want to take to Disneyland or Disneyworld I found an amazing program that will save you hours of standing in line and competely schedule and map out your day. The program is ridemax.com and you simply choose the rides you want to go on (they give a detailed description of each ride and rate it) and then it tells you exactly what to do and where to go and when. It wasn’t free, it was $14.95, but it was worth every penny and more.
