Thinking: I am interested in selling my mortgage note, what determines its value?
The first group of factors we will look at is: how does your borrower perform against his financial obligations?
We will evaluate two things. First how is your payor performing on his obligation with you? Has he made all his payments on time? Next we will look at how he performs with his other creditors by looking at a credit report.
This is a risk-reward business so the less risk we take, the more we will pay for your mortgage note. And correspondingly, the more risk we have to take, the less we will be able to pay for your note. People tend to the creatures of habit, so generally credit scores don’t change much over time. So in summary, we will pay more for a mortgage note with payors with good credit, then we will pay for mortgage notes with payors with rough credit.
When you are thinking I am interested in selling my mortgage note, the credit score of your borrower will play a major role.
Then we look at the type of property securing your mortgage note.
We rate the mortgage in terms of its desirability. From an investors point of view the most desirable mortgage is on a single-family house which the owner occupies. Because even if someone has good credit, they may face a financial hardship and find themselves without enough money to pay all their bills. So, generally the last payment they will not pay is their house payment, as they need a place to live and they don’t want to lose their home.
The next most desirable mortgages are ones on investor properties, then mortgages on commercial properties and then those on land.
So, when you are thinking “I am selling my mortgage note”, you can expect to receive more money for a mortgage note on an owner-occupied single-family home than you will for a mortgage on any other type of property.
Next we look at the borrower’s equity position.
The more that the borrower has at risk if he has a financial difficulty, the more incentive he will have to solve the problem and not just walk away from property. From an investor’s point of view, the larger the equity position, the less risk and the more that an investor will pay for your mortgage note.
Then we look at the terms of the note.
Generally, we will pay more for a higher payment, i.e., higher interest rate than we will for a lower payment. Also, we look at how many months are left on the note. Usually, we will pay more for a note that has a shorter payback period, then we will for one that has a longer payback period.
And, finally, we evaluate what kind of return (interest rate)
do we need in order to take on the level of risk presented by this potential mortgage note purchase. And, we determine how much are we willing to invest in the mortgage note as a percentage of the value of the property.
The worst thing that can happen to us is that the borrower doesn’t pay, and the mortgage note goes into default. Because in the default and foreclosure process, we can incur significant expense. Carrying cost, fix up expense and selling expense can easily eat up 25 to 30% the value of the property.
If you are at the point that “I am selling my mortgage note”, be sure to deal with someone who has your best interest at heart. Check out our company philosophy.
Also see what other note sellers have had to say about us.
For a no-obligation offer to buy your note, please fill out the form on this page. Or you may call us at 772-232-2383 and we will help you in any way that we can.
Best of luck in moving forward!
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