I am the Lender of a Balloon Mortgage, that was due over 120 days ago, can I charge Late Penalities?

pat_h · Joined: 04 Sep 2008 Posts: 2 1.89 Dollars($)

I entered into a Balloon Mortgage with my partner 3 years ago on a piece of property we purchased. The note was due over 120 days ago. I have send three demand for payment letters.

I now have the property sold. Question is:

1. Can I charge a late penality for each month that the note was not paid in full? IE: 50,000 due 5% late fee after the 15th new amount due by the 3rd of the next month is 52,500

and then 52,500 is now due and 5% late fee again after the 15 days ...... until we close on this property?

I know I can foreclose, however I need an attorney, which I am going to see next week. I am just curious as to what is my rights. Can someone just not pay you and it goes on and on? Yes, never lend money to friends..... moral of the story.

sara · Posted: Thu Sep 04, 2008 6:36 am Post subject:

I guess you can charge late penalties. But it's better if you get this conformed from a mortgage attorney or any of the mortgage experts in this community can help you. Let's wait and see what they have to say.

Take care

gmakerley · Posted: Fri Sep 05, 2008 9:27 am Post subject:

if you did not contractually agree to late fees, i don't see any way in which you can charge them now.

i am baffled by your statement saying that the property is sold, followed by a statement indicating you're considering a foreclosure. how does that make sense?

further, this is a "property we purchased." if you both were purchasers, what sort of deal did you arrange to begin with? did you somehow place a lien on this property that is owned by the two of you? that seems pretty far-fetched. if you foreclose, how will you treat yourself as an owner?

i'm sorry if i sound a bit flippant here, but your post truly doesn't make a lot of sense to me. are we to assume that this $120K balloon note was a signature note and therefore not secured by this real estate?

what gives?

pat_h · Joined: 04 Sep 2008 Posts: 2 1.89 Dollars($)

Yes, there is a penalty fee of 5% after 15 calendar days of the due date, on the total amount due, principal, interest. And at that time the whole amount was due.

We, bought the property, however, they did not put up any money, they borrowed it from me and their half of the property was put up as security.
It was a Balloon Mortgage Note, prepared by a Title Company at closing.
In other words, one partner lent the money to the other.

I have found someone who wants to purchase the property. Good, great wonderful, however, my problem is that these people do not think that they owe me any money other than the amount that was due on May 3rd.
I disagree. I believe that there is penalty due for each month that they did not pay me until this property closes.

The foreclosure is just another option, which I really don't have my heart in, just want them to have to pay what they should, close on the property and be done.

I have an appointment to see an attorney on Monday, I was just curious as to what is done in the "real world" when someone does not pay their mortgages.

Thanks

gmakerley · Posted: Fri Sep 05, 2008 9:56 am Post subject:

well, to be perfectly honest, the real world is vastly different from what you describe.

however, in the real world, you won't find too many balloon mortgages any more - creditors want regular installment payments. yes, there are late charges, typically 5% of the overdue payment. yes, foreclosures are a way of life in the real world, but yours is such an unusual situation it's hard to apply those rules.

generally, you won't find any lenders in the real world mortgaging a portion of a property, as you've done.

i guess the bottom line for you is at the time of a sale, you'll be made whole. further, with the assistance of the attorney you'll be engaging, you may very well be able to collect some late/penalty fees from your partner.

my bottom line, if it were me (and this is quite easy to say, since it isn't me) would be this: i'm selling, i'll get my investment back (and maybe some more) and be free of all this aggravation. getting penalties on top of the investment would be gravy and nothing but gravy.

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