I've Serviced My Seller's $38,000 Second Mortgage Myself for Five Years

9:05 on a Tuesday morning, April 2021, at the seller's kitchen table with the closing papers still warm from the title office printer. Eleanor, seventy-one years old, selling the house she'd lived in for thirty-eight years, slid a manila envelope across the table. "That's the note," she said. "$38,000 at 4%, ten years, payments due the first." No servicer. No portal. No autopay. Just me, her, and a promissory note with a clause requiring I keep the original in a safe place.

I have never read a document more carefully in my life.

why the note existed at all

The house appraised at $315,000. The first mortgage I took was $247,000. The gap — my down payment shortfall plus her asking price — got bridged by her carrying $38,000 herself, secured by a recorded second mortgage on the deed. For her it meant a 4% return, far better than her CDs, plus steady income into her eighties. For me it meant I could buy the house at all with 10% down instead of the 20% my first lender's second-lien pricing demanded. Seller financing is the quiet workhorse of arduous deals, and almost nobody under sixty knows it still happens.

the machinery I had to build myself

There is no bill. There is no grace period reminder. There is only the first of the month and my own conscience. So I built a system: a recurring transfer into a dedicated high-yield savings account on the 25th, a certified check mailed on the 28th, and a log sheet — an actual paper log — where I record check number, date mailed, date cashed. Eleanor, bless her, also keeps a ledger, and once a year we reconcile ours over coffee. We have never once disagreed by more than a schedule of her cashing a check late while on vacation in Ireland.

The bank figured I was odd for ordering a certified check every month for five years. The tellers know me now. They asked when the loan ends. I asked myself the same thing: 2031.

the year the taxes got tense

Third year in, my property reassessment jumped 22% and my monthly budget buckled. I called Eleanor — an actual phone call to the person who holds your lien, which is both the terror and the gift of private servicing — and she simply said, "Pay what you can this month and catch up by fall." Try getting that sentence from a bank's loss mitigation department in under four months. I caught up by October, paid a slight extra amount for the trouble, and she refused it. We settled on her letting me cover the coffee next reconciliation.

That flexibility cuts both ways, tho. The same closeness that made forbearance a phone call means missing a payment would be failing a person, not a queue number. I have never been late. The paper log on my desk is partly bookkeeping and partly guilt architecture.

the payoff math nobody advertises

Five years in: original balance $38,000, 4% amortized over ten years, payment $385. Current balance is about $21,600. Total interest over the full term will be approximately $8,200. Had I funded the same $38,000 thru a home equity line at prevailing rates — call it 8% at the time I checked — the interest over ten years would've been closer to $17,500. Eleanor's rate saved me about $9,000. Her yield beats what her broker offered. Nobody in that arrangement is a charity case. That's the part critics of seller carry never get: it's a market rate for a market risk, agreed at a kitchen table.

the refinancing trap I have to plan around

Here's the headache nobody warned me about: I can't casually refinance the first mortgage. Any refinance of the first lien triggers a subordination request to Eleanor's second — she has to sign documents agreeing her lien stays second, and some lenders simply refuse to close behind an unseasoned or privately-held second at all. When I looked at refinancing the first in 2023, two lenders declined outright cuz they wouldn't subordinate to a private note. The refi died, which cost me mayb half a point, and Eleanor signed nothing. If you're considering seller carry, ask your future self what refinancing will look like, because the answer is: complicated.

writing the payoff, someday

The note runs to 2031, when I'll be forty-nine and Eleanor will be eighty-one. We've already talked about the payoff ceremony she intends to have — her word — where I hand her a certified check for the balance and she hands me the satisfied note and the mortgage discharge gets recorded at the county. She wants pictures. I've agreed to pictures.

the envelope, five years on

The manila envelope still sits in my fire safe, and every month on the 25th, when the transfer fires into the savings account and I write check number fifty-eight into the paper log, I think about that kitchen table. Servicing my own second mortgage has cost me stamps, teller modest talk, and one refinance — and saved me approximately $9,000 in interest, a 4% income stream for a woman who earned it, and a friendship I never anticipated to buy with a house. When the last check clears in 2031, I'm keeping the envelope. The log, too.