What to do? I negotiated the best deal I could with the lender, and then I approached the seller who holds the current mortgage. I told him I was thinking about re-financing, which would mean he’d get paid off and get his money out, but that the cost of the money was more expensive than his. He was motivate to get his money back, because he could then re-lend it out at a higher rate than what I was paying him. He then said, if I were to pay him out in the near future, he would discount the mortgage he holds on my property by $150,000. In other words, when I arrange my new first mortgage from the commercial bank, he would knock $150,000 off the amount that I need to repay him to get rid of his loan. This LITERALLY results in me putting another $150,000 in my pocket. Not bad for a day’s work! This provides a view into the whole world of discount mortgages, where you negotiate with the note holder and get them to accept less than the face value of the loan. In this situation, it’s truly a win/win outcome, because I can now access more equity in my property and it still saves me money because of the discount I have negotiated. For the seller who holds the mortgage, he’s going to get his money back a year earlier, and can immediately re-lend it out at more than twice the interest rate he was paying me. When you start to understand the math behind real estate and how mortgages and and yields work, it’s truly scary how much equity and profit you can create for yourself with just a few phone calls and a little negotiating! Now, if only I could do this a few times every week . . . .]]>