What’s it like to talk with a mortgage note buyer?
At this point you’ve decided that the time has come to sell your mortgage note for cash to make an investment, pay tuition, pay bills, or eliminate the worry of record keeping, default and potential foreclosure. And you decide to call a mortgage note buyer. Or you may decide just to click through to see how to sell your mortgage note.
But before you call a mortgage note buyer, be sure to have a copy of your promissory note, mortgage and closing statement
from your property sale. If you can’t find copies of these documents, call the attorney or title company, which handled the property sale and ask for copies. These documents will enable you to answer the questions of the mortgage note buyer.
Let’s construct an example to illustrate a few points. We’ll assume that you hold a first mortgage on your payor’s home. The sales price was $80,000 with a down payment of $20,000. You took back a first mortgage of $60,000, paid off over 20 years, at 10% interest and a monthly payment of $579. The note is four years old; 48 payments have been made. These payments totaled $27,792. The balance of the note is $55,361.
You send us copies of your documents. After careful study, we offer to buy the contract for $50,101 or 90.5 cents on the dollar. (The mortgage, which you actually own, may be worth more or less than this example). But you may be thinking
Why is the offer less than the balance?
A mortgage note buyer measures many investment criteria. Investing in a mortgage, is not like investing in a CD or government bond with guaranteed interest and payments, paid on time. The mortgage note buyer considers risks such as: will the monthly payments be paid on time? Will the payors maintain employment so that they can make the payments? Will they maintain the property? Will they keep up the fire insurance and the property taxes? Will they be able to avoid divorce with its devastating financial consequences? Will the real estate hold its value?
Unfortunately, there is always the risk of default.
No one can predict the future. And, a mortgage that goes into default is a major problem for the mortgage note buyer. Not to mention, that a foreclosure can take years and cost plenty of money to resolve. The note buyer has to be compensated for this risk.
And, the sales price of your mortgage is affected by the purchasing value of money. A mortgage represents a cash flow, with the same monthly payment, spread out over several years. It does not grow in value like gold, rare coins, or fine art. If the cost of goods and services goes up and the value of a dollar goes down, there is a real problem since the payment amount won’t stay even with inflation.
Think back for a moment. What were the taxes on this property ten years ago?
Compare those taxes to today. What did it cost to go to a ball game or a show ten years ago? How does that compare to today’s cost? Wouldn’t it be nice to buy a new car for the cost of one ten years ago? How about today’s cost of medical care compared to ten years ago? Every day our dollars buy less. The note buyer’s real concern is that the mortgage payments will purchase less goods and services as time goes on.
OK, you now understand this, but you may be wondering, how can I do better in this transaction?
First, let’s review our example. You received $20,000 as a down payment plus $27,792 (in payments over four years) and you just received a cash offer of $50,101. You will have received $97,893 or about $18,000 more than the sales price over four years.
While that’s not too bad, you may do even better. Talk with us to explore all options. Tell us the reasons why you want to sell your note so we can design a mortgage purchase plan tailored specifically to meet your needs.
You see there are many ways to structure the sale of your mortgage so that you receive more money.
For example, it may be better for you to sell only a portion of your mortgage. Let’s assume that you would like $30,000 to buy a mountain cabin. After discussion, we offer to buy the next 84 payments of your contract for $30,022. You would assign the next 84 payments to us and you would get the note back when it had 108 payments left. At that time, assuming all payments had been made on time, the note would have a balance of $41,126. Your total received at that point would be $118,942 counting the down payment, 48 prior payments, the cash offer and the value of the mortgage when you get it back.
Or, maybe you would like to keep the monthly payment of $579 for the next two years and sell all the payments after that. Or, maybe you want to keep a monthly cash flow of $300 a month and just sell $279 of each monthly payment. We can design purchase plans to accomplish any of these goals for you.
If your mortgage has a balloon, you could sell all of the mortgage, or only the payments, keeping the balloon for yourself. Or, you could sell part of the balloon and/or the payments. As you can see there many purchase options that can benefit you so make sure that you work with a mortgage note buyer who will explore each option, including rewriting the mortgage, to eliminate the balloon.
So you’re convinced this process isn’t so bad and you decide to sell your mortgage now.
Be careful of dealing with anyone who casually makes you a purchase offer over the phone. There are many factors to analyze, and don’t forget that we are talking about YOUR money, so deal with a buyer who will sit down with you and discuss the entire process. If that is not possible, deal with a buyer who requires copies of your papers and a credit report on your payor before making you an offer.
It’s extremely important that you be comfortable in the process of selling your mortgage. Be sure to work with a mortgage note buyer who can overcome obstacles. See what other note sellers have had to say about us.
In the due diligence process, many problems can occur. Problems occur if the documents were prepared in error, the original note was lost, the property has declined in value, the payors have stopped making payments, or they haven’t paid property taxes, federal income taxes or hazard insurance. Some notes can’t be sold as written but can be sold with modifications. It is crucial that you work with a mortgage note buyer who completely understands the process and has the resources, drive, persistence, and ability to overcome obstacles to complete the sale of your mortgage in a timely way. Work with someone whom you can trust and who will work FOR YOU in your best interest.
To get started, just simply fill out the form on this page or call us at 773-232-2383.
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