How To Sell Mortgages Notes for Cash
If you are considering selling you real estate mortgage note or promissory note, then continue reading we will help you understand the steps necessary to complete the sale of you note. Notes are written financial documents that outline the details of a debt. Notes can exist on almost anything but they are general created when a piece of real estate or business is sold.
What is a Mortgage Note?
A mortgage note is financial instrument that detailed the details of a loan. Mortgages notes are used in the purchase of a real estate property or business. Traditional mortgages are normally provided by Banks, Credit Unions or other large financial institutes.
A private mortgage notes are held by home sellers or property sellers. A private mortgage note can be offered by a home seller generally when the home is owned outright by the homeowner. This type of financing is called owner financing or seller financing.
Note Seller Tip
When you sell your note, your send the money to a private note buyer and not to a traditional bank.
Most owner financed mortgage notes are for five,seven or ten years and typically have higher interest rates than banks or credit unions. Since the Interest rates are higher than a bank many people refinance their notes before the full term of the note.
Why Do People Sell Mortgage Notes?
There are many reasons a note holder may want to sell their note, here is a list of some of the reasons a seller may wish to sell:
- Pay of credit card or other debt
- Access to a lump sum of cash
- Downpayment for a house
- Extra money for retirement
- Investing in better opportunities
- Paying for University,College or other education
Basically there are no restrictions on what you use the money for when you sell the payments of a mortgage note or promissory note.
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What is the value of my real estate note?
The value of your note depends on a number of parameters. You will not get the full face value or balance of your note but you can get close if the note was well structured.
The Parameters that have the biggest impact on the value of a promissory note are as follows:
- The Credit Score of the person paying on the mortgage note.
- The Value of the property, the note has to be less that the full value of the property.
- The property should have clear title, any title issues will need to be cleared up before the closing when selling a note.
- Amount and Interest Rate of Note
- Remaining payments on the note
- Mortgage Term: 5 to 10 years is normally, any more and the value of the note will be less due to the Time Value of Money
- Down payment amount: 10% is generally considered the minimum, 20% or more is ideal.
Items 2 – 6 should be on your mortgage note or trust deed.
How to get the best value value for your mortgage note when selling.
The strength of the underlying collateral can dramatically affect the value of you note, e.g land and real estate.When Selling only part of a promissory note, the discount on that part of the note will generally be much less as the note buyer is taking on less risk.Shorter notes receive less of a discount when willing to note buying companies.A note with a strong payment history with no missed payment will receive a higher offer,A note payer with a higher credit score will be less risky for a note buyer and therefore will receive less of a discount.The value of you not will increase when there are lower interest opportunities in the market.A mortgage note will have more value when the terms are clearly defined in the notes,mortgage or trust deed.
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