3 Ways to Sell a Mortgage Note
A mortgage note is a legal document secured by a mortgage (or a deed of trust, depending on the state the property is located in) requiring a borrower to repay the loan and its associated interest within a specified length of time. As a mortgage note holder, you can continue to collect a monthly sum plus interest from the borrower, or you can sell your mortgage note to a broker or loan acquisition firm for immediate cash. Many note holders choose the ladder to fund their immediate cash needs and rid themselves of the risks and responsibilities associated with being the lender.
If you are thinking about selling your note, the amount you will receive will depend on a variety of factors, including the current value of the property secured by the note, the borrower’s credit score, the level of risk, the note’s remaining balance and the interest rate, among many other things. With that said, you have several options to choose from when selling your note: full purchase, partial purchase or split partial. Here’s a brief overview of these options:
A note sale is considered full purchase when the note holder sells all of the remaining monthly payments on the mortgage note. With a full purchase sale, the seller is freeing himself/herself of all the risks and responsibilities that come with being the lender. But, since the note buyer is fully assuming the risks of depreciating property values, missed payments or non-payment from the borrower, and foreclosure, your note will be purchased at more of a discount in comparison to the other two options, as there is more exposure of risk.
Say you are receiving a monthly payment of $1,500 at a 10% interest rate, and the remaining payment term is 140 months. A sale would be considered partial purchase if the note holder sells the next 70 monthly payments of $1,500 to the buyer. After 70 months, the note seller resumes ownership of the note and collects payments for the remaining 70 months.
If the monthly payment of $1,500 is split between the note holder and the buyer, then the sale is a split partial. Split partial and partial purchase note sales pose less risk to the buyer, so you can usually get more value for your note.
When deciding which option you want to pursue to sell your note, consider your need for cash and your willingness to assume the risks and responsibilities associated with owning the note.
To learn more about selling your mortgage note and the note buying process, contact our experienced note buyers at Amerinote Xchange. We have been in the note buying business for over a decade and will provide you with the best possible value for your asset: 1-800-698-3650.