Can I Sell Part of My Mortgage Note?
Owner Financing continues to gain popularity, but are you tired of having your money tied up and need cash now? Just because you are financing a house, it doesn’t mean you have to years or decades to receive your money.
Sellers have the choice to sell all or just part of their future payments for cash today.
What Are my options?
There are two main options you have i f you are looking to sell all or part of the note or notes your hold. They are appropriately called a “Full” or “Partial” note purchase.
Option 1 – When note buyers purchase all the remaining payments on a land contract, mortgage note, or trust deed it is considered a full purchase.
Option 2 – When the note buyer purchases just a portion of the remaining payments it is considered a partial purchase.
Here’s a closer look at two examples using the Full and Partial Purchase Options.
The Partial Purchase
If the investor only purchased the next 48 monthly payments of $1,140.48 each then it would be considered a straight partial purchase. Once the investor received the next 4 years of payments, the note would be reassigned to the seller and the seller would collect the remaining 72 payments (120 total payments less the investors purchase of 48 payments leaves 72 payments remaining to the seller).
The purchase can also involve splitting the monthly payments received from the buyer between the investor and the seller, also known as a split partial. Using the same example of 120 payments of $1,140.08 each, an investor might agree to purchase $600 of each remaining payment leaving a remaining residual of $540.08 to the seller for the next 120 months.
The terms of the transaction are spelled out in the Purchase Agreement. This important document outlines the servicing arrangement along with what happens in the event of an early payoff or default by the buyer. Competent legal counsel should review the agreement to protect the rights of all parties.
What is the best option?
It depends! The best choice will depend on the cash needs of the seller and the value of the payments being sold.
A partial purchase can help minimize the discount but it comes with the worry of the buyer keeping payments current in the future.
A full purchase can give sellers peace of mind knowing they are through with the property once and for all.
The important thing is to find the right balance to fit your specific needs. The first step is getting a free mortgage note analysis so you know the current market value of your note. From there, finding the right type of sale for you becomes much easier.
Please contact us if you would like to discuss the options available on your owner financed mortgage note.