Six months with paid extensions or twelve months with minimum interest, same 65k bridge piece

The two versions differ in who has to ask for something. Extensions put the borrower in front of you twice with a check in hand. Minimum interest puts nobody in front of you at all and pays you for the privilege.

If you write extensions, write the conditions, not just the fee. Current on payments, senior current, no new liens recorded, and a rent roll and an updated payoff from the senior delivered before the extension takes effect. Otherwise the extension is automatic in practice and you've bought yourself a fee and no information.

On minimum interest, the drafting matters more than people think, and how a court treats it varies by state, so that's for your attorney where the property sits. I'd rather see it framed as a stated minimum yield earned at closing than as a penalty for paying early. Same money, different posture.

I like the maturity inside the senior's for a reason nobody has said yet. It forces the borrower to solve your loan while the senior is still calm. Once the senior is 30 days from maturity nobody in the room cares about your 65k.

@arbor doesn't that just mean you get told no earlier? If the refi isn't ready at month ten it isn't ready, and being 60 days ahead of the senior gives cairn a maturity default he probably doesn't want to act on.

Voted extensions. Twice a year of someone having to look me in the eye is worth more than 3,900.

Eight months to refinance on a 7 unit with three units offline reads optimistic to me from the land side, where I've never once seen a timeline hold. Four months of seasoning assumes the units are leased the day they're finished and the lender accepts four months of history. Some lenders want six months, others want twelve trailing. If the real answer turns out to be month twelve to fourteen, then both of cairn's structures are the wrong length and the extension version at least prices that honestly.

What stops the borrower from just deciding the extension points are cheaper than hurrying? A point on 65k is 650. If the delay is worth more than 650 to him he takes the extension every time, and cairn's decision point turns into a toll booth he pays without slowing down.

@pike that's how lease renewals go too. The fee only changes behavior if it's uncomfortable, and 650 on a 65k loan probably isn't.

Can someone say plainly what minimum interest means? I read it as, you pay me six months of interest even if you pay me back in two, so 3,900 is the floor. Is that right, and does the borrower usually agree to that?

@rigging that's how I read it as well, and from what people here have said the borrower agrees because the alternative is losing the deal.

The thing I can't get my head around as someone with no deals is how cairn judges whether month eight is real. @parcel says four months of seasoning may not be enough for the refi lender. Cairn, do you ask the borrower which lender he's planning to refinance with and call them yourself, or is that not how it works?