7) “Option to Extend” – If a “balloon 11) “Skip a Payment” – Sometimes, if
payment” is involved, writing an “option to extend” the parties are relating well, it is possible to
into the note could prevent a rough ending if include a term allowing the borrower to skip a
refinancing or selling conditions are unfavorable. payment in the event of job loss, rental vacancy,
It could extend for a year or two with a fee paid to or other misfortune. This can be made part of the
the seller, or a “partialpaydown” made. note, or dealt with at the time. Including it ahead
8) “InterestOnly” – describes the
of time is preferable for a more stable transaction.
arrangement where the payments consist only of 12) “Substitution of Collateral” –
interest, and a “balloon payment” occurs at Sometimes, an enterprising buyer will negotiate
maturity. with the seller the right to move the note and
9) “Zero Interest” – involves payments
secure it to a different property. This is usually
done to sell, exchange, or refinance the property.
of principal only, with no interest being charged. There should be criteria stated to protect the
This term is a sweetie for buyers! noteholder, but approval “should not be
10) “Deferred Interest” – involves
unreasonably withheld” if the criteria are met.
interest accruing to maturity, when both principal 13) “Right of First Refusal”
and interest are due. Although this helps cash –Sometimes, an enterprising buyer will realize
flow, unlike zero interest it is very risky. Rapid that the seller might decide to sell the note at a
appreciation will be essential for this to succeed, discount to raise cash in the future. Including this
and losing the property is a realistic term gives the buyer first shot at buying their own
possibility! debt back at a discount, effectively lowering the
purchase price.
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