2nd mortgage renewal fees?

[gaffleck]

I`m looking for some advice. Last year I bought a discount 2nd mortgage with a face value of $15,000 paying 10% interest-only with about 85% LTV. (i.e. I am the bank). The homeowner wants to renew the note with me when the term expires in October. I am unsure of what the customary fees are to the homeowner for renewing a private mortgage. Does he pay all the legal fees? Is it normal for me to charge a renewal fee? He wants an open mortgage with a 3-5 year term. Do you think 10% is still a fair rate or should I ask for a higher interest rate? Should I have him requalify (i.e. verify income, credit check, property appraisal?)

All advice appreciated. Thanks.

Geoff Affleck

 

[ToddStokowski]

Treat the renewal as if it was the first time you met the person.

Credit checks
Appraisals
New fee
Property tax clearance
Insurance - second loss payable
RPR
New interest rate - may be up, may be down, depending on the risks, current competitive, other factors

Hope that helps.

Todd Stokowski, CA

 

[DonCampbell]

Todd nailed it. You must measure the risk factors... have they got better (for you) or worse. You will want to analyze the new LTV, higher LTV the higher the higher the interest rate (because of the higher risk). Other thing to consider is what is the best use of those funds for you right now, do YOU want to continue the relationship.

If not, show him how he can refinance his 1st and pay you off.

Why not call around to 2nd mortgage companies to see what they are doing, what their charges are.