- If you need to divide your assets or want an influx of cash, you may want to sell a mortgage note.
- You can sell a whole note (full sale) or a portion of the payments (partial sale).
- The price you’ll receive will depend on the terms of the note and the credit score of the borrower along with current interest rates and property market values.
- Reputable mortgage buying companies will answer questions and provide no-obligation quotes.
How Can I Sell My Mortgage Note?
Selling your mortgage note is not a difficult process. There are many companies and entities who buy mortgage notes as investments.
How To Sell Your Mortgage Note
- Determine the value of your mortgage note
- Find a buyer
- Negotiate the terms
- Prepare the paperwork
- Close the sale
Laws about selling mortgage notes vary from state to state, and even within states there may be municipal obligations. Check for the specific regulations with your state Bureau of Real Estate.
Your promissory note or deed of trust will help you determine the value of your mortgage note. Once you’ve researched potential buyers, collect all the information you need. That will include the name of the property owner, the address of the property the mortgage note covers, the amount and interest rate of the loan and the payback period.
When you have all that information together, you can reach out to potential buyers by phone, in person or online. Remember, you are not obligated to sell just because a company makes you an offer.
Sale Options When Selling a Private Mortgage Note
You have options when selling your private mortgage note. First, you can sell the whole note. This means you sell full-ownership rights for an agreed-upon price. Depending on the company you sell to, you might choose to receive that price in one or two lump-sums or through regular payments. A full sale is a popular choice, as it gives you the largest upfront payment.
But there is another sale option that might better suit your needs. You might prefer a partial sale if you want to hold onto some of the ongoing mortgage payments. With this option, you sell a percentage of the mortgage payment to the buyer, rather than the whole note. You and the buyer can determine what that percentage will be, and if it covers balloon payments or not.
It’s important to consult with a trusted financial advisor before deciding what type of sale will best serve your plans and benefit your financial strategy.
READ MORE: Seller Financing
Why Sell Your Mortgage Note?
You can sell your mortgage note for any number of reasons. You might want to rebalance your portfolio, whether to lower your exposure to risk or for estate planning purposes. Or you might want a lump sum of cash to buy another property, fund college tuition, pay medical bills, or even to take advantage of another investment opportunity.
You can use the funds you receive from selling your mortgage note however you’d like. The payment you receive will give you the flexibility to do anything you want, from paying down debt to funding your retirement.
Read More: Promissory Note vs. Mortgage Note
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How Much Is My Real Estate Note Worth?
The price for your mortgage note will be determined by several factors including the terms of the note, the creditworthiness of the borrower, the value of the property and the current market conditions for real estate in the property’s area.
The terms of the note include the amount of the down payment, the length of the mortgage term, the interest rate, and the date and amount of the remaining payments. You can find this information on your promissory note and deed of trust. The higher the down payment, the more you’ll receive when selling your mortgage note.
The credit history and score of the borrower also comes into play. If the borrower has missed payments, it will be more difficult to sell your mortgage note. On the other hand, if the borrower’s payment history is excellent and credit score high, it will be easier to negotiate a good price. The more payments have been made, the better your chances of selling your mortgage note for a top price.
The value of the property may have changed since the mortgage note was first issued, so the buying entity will want a current appraisal. Most reputable buying companies will pay for that appraisal themselves.
READ MORE: Contract for Deed
Finding the Right Mortgage Note Buyers
When it comes to selecting a company or entity to buy your mortgage note, there is plenty of choice: you’ll have to do some research to decide which is right for you. Working with an experienced and reputable mortgage buyer will give you better customer service, a smooth and streamlined process and fair market value for your mortgage note.
To get started, ask friends and colleagues for recommendations. Follow up on any suggestions with online research, to see who the companies have served and what their customers said about the experience. Social media can be a help, and it’s always smart to check with the Better Business Bureau to be sure the company you’re working with is trustworthy and financially stable.
Check that the company is licensed by your state’s Bureau of Real Estate and verify the credentials of the company and individuals who work there. Don’t be afraid to ask questions of their representatives: reputable mortgage note buyers will be happy to answer your queries with no obligation. Get an outside opinion from a trusted financial advisor when evaluating any offers.
READ MORE: Balloon Notes
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Tips for Getting the Best Value From Your Mortgage Sale
You won’t receive the full amount of the principal if you sell your mortgage note, but there are a few tactics that can help you realize a higher selling price.
How To Get the Best Value
- If possible, try to sell when interest rates are low
- Check your borrower’s credit rate: a high credit rating means a better price
- Notes with shorter terms generally receive higher offers
- If the property includes both land and a building, it will usually sell faster
- Consider a partial sale: you may end up earning more in the long run
In addition to those tactical considerations, overall strategies can help you realize a larger benefit from the sale. It’s important to shop around, because not all mortgage note buying companies will have the same priorities at the same time. Be flexible and prepared: have all the paperwork and records you need on hand. Only work with reputable buyers to ensure fair negotiation of terms and prompt payment.
Most importantly, get professional advice. Ask questions and get counsel from a trusted financial advisor who understands your personal circumstances and needs.
FAQs About Selling Mortgage Notes
You won’t receive the full value of the principal of your note, but you can realize a substantial percentage. Or, if you prefer, you could sell a portion of the note in a partial sale and keep some of the income stream for future needs.
There are many companies and entities who purchase mortgage notes for investment purposes. You can find them online with a search in your area.
The value of your mortgage note will depend on current interest rates, the terms of the note, the credit score of the borrower and the value of the property.