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Sell Your Mortgage Note for Cash Today
When you privately finance the sale of a property with a mortgage note, it takes a while for you to collect all your money. If you need a large amount of cash today, this is a real problem as a significant amount of your net worth is tied up in one contract. By selling your mortgage note, you can get a sizable lump sum payment in exchange for some or all of your future incoming mortgage payments. This gives you a great exit strategy if you’ve changed your mind about wanting to finance a mortgage yourself.
Reasons to Sell a Mortgage Note
There are many good reasons to sell a mortgage note, which is why this type of deal is becoming increasingly more popular. The main reason for selling a mortgage note is that it frees up a lot of cash. This is very convenient if you have some large expenses that you are struggling to pay, like college tuition or medical bills. It also frees up your money for another investment. While financing a mortgage might have seemed like a good place for your money at the time, you might decide you could make more in the stock market, by starting up a business, or by buying another property. By selling your mortgage note, you can do all these things.
Selling your mortgage note also takes away the hassle and risk of collecting mortgage payments. As the financer of a mortgage, it is your job to collect the monthly payments from your buyer. If you’re dealing with someone that is forgetful or that struggles to pay the bills, this can be frustrating. In addition, there is also the risk that the buyer might not be able to pay off your mortgage. This would put you in the complicated situation of handling a foreclosed mortgage. By selling the note, you don’t have to worry about these issues.
How it Works
Selling your mortgage note is a pretty simple process. Most companies ask you to fill out a quick form explaining the details of your mortgage. With this information, the purchasing company can give you a buying quote so you can decide if you want to move forward. If you like the offer, you’ll need to show the company a copy of your settlement statement, your promissory note, and your mortgage, trust deed, or contract.
From here, the company will want to review the property and the financial status of the person paying the mortgage. They will pay for an appraiser to look at the home to make sure it is still worth at least the sales price of the mortgage. If it isn’t that’s not a problem but you’ll receive less money. The buying company will also verify the home buyer’s credit score, payment history, insurance information, and other important financial information to make sure the buyer is a safe borrower. If everything checks out, you just need to get a copy of the property’s title so the mortgage note buyer can close the deal. In as little as 2 weeks, you can finish this process and get your money.
How Much Will You Get
There are a few factors that go into determining how much money you’ll get from your mortgage note sale. The buying company will first want to know the size of the mortgage and how many payments are remaining, as this determines their future income. The interest rate on the mortgage is also a factor with higher interest payments leading to a larger payout. The buyer’s credit score and history also has an impact. A buying company will pay less for a riskier lender because they need to price in the risk of a mortgage foreclosure. Lastly, the type of property that is behind the mortgage and the current market interest rates also go into the buyer’s calculation.
Once the buyer calculates how much they would pay you for your total mortgage note, you need to decide if you want a full payout or a partial payout. You have the option of only selling a portion of your future mortgage payments. This lump sum payment would be smaller but it also means that you would keep receiving some mortgage income in the future.
Disadvantages of Selling a Mortgage Note
Before selling a mortgage note, there are a couple disadvantages that you should consider. Whenever you make a major transaction, there will be extra fees and a mortgage note sale is no different. You’ll get less money from your sale than you would have had you just kept the note until completion. That’s the exchange you need to make to free up your cash. In addition, selling the mortgage note means you’ll stop receiving mortgage payments. If you were using this income to support your lifestyle, you need to be disciplined with your lump sum payout because you won’t be getting any more money.
In most cases, these disadvantages are easily outweighed by the financial benefits of a mortgage note. If you are frustrated with a slow mortgage payment schedule, are sick of wasting time chasing after payments, and want cash today, selling your mortgage is the answer.