Mortgage notes, or promissory notes, are financial documents that detail the payments for a loan used to purchase property. People who hold a mortgage note for a home, business or property can sell it for a lump sum of cash to a buyer in the secondary mortgage note industry.
A mortgage note is a financial document that details a loan agreement used to purchase property. Traditionally, you may go to a bank, credit union or another financial institution to get a real estate loan. They loan you money in exchange for a long-term payment plan that can last decades, depending on the particulars of the mortgage.
A private mortgage note is held by a home or property seller. In these instances, the seller may own their property outright and can offer the buyer their own mortgage deal.
Although terms of the deal are similar, the buyer sends payments to the seller and not to the bank.
Most mortgage notes are for five years, during which time the buyer typically applies for a mortgage from banks and repays the seller using the bank loan. Some sellers — particularly those with commercial property — see this kind of deal as a long-term play: they can depreciate the property over time for tax benefits, get reliable monthly income and have an asset to use as collateral if things go sour.
As time progresses, private mortgage holders or buyers may reconsider holding a mortgage note. If note holders need money now, they always have the option to sell their mortgage note.
Private mortgage holders sell their notes for a variety of reasons, most of which have to do with getting money to handle immediate needs. Selling the mortgage provides them with a lump-sum payment. Examples include:
There are no restrictions on how someone can spend the money generated from selling a mortgage note. In addition, the process of selling a note in this market can be much smoother than a regular mortgage deal.
The process is simple. Many companies are willing to buy your mortgage note and take on risk because these are collateral-backed securities. You will need the security you received when completing your financing, which is called a mortgage or trust deed.
Once you decide to work with a company that buys mortgage notes, you can call them or complete a form online to get an offer. Offers are based on the current market, an appraisal of the property, the terms of the note and the company’s competitive rates.
While fees for using a real estate attorney can cost you thousands, these companies often provide an attorney and directly fund you to give you a competitive rate.
You are not limited to the total amount you have to sell. Your selling options include:
If you have questions about what is a fair rate or want a recommendation for companies to work with, we’re here to help. When you call our hotline, you’ll be connected with financial experts who will listen to the specifics of your situation before making recommendations and answering any questions you have.
You will not be getting the exact principal from your mortgage, but you can still receive a large offer. To help you understand how much money you will receive for your payments, here are the factors used to determine the value of your mortgage note:
You can find most of this information on your promissory note and deed of trust.
Not all mortgage notes have the same value. While some are difficult to sell, others can be purchased with a low discount rate, which means you get more money. Here are some insider industry tips for getting the best value from your notes:
If you’re ready to sell your mortgage note but don’t know where to start, give us a call. Our financial experts will be able to answer any questions you have about the process, can make recommendations for mortgage note purchasing companies and may be able to provide you an offer over the phone.