Can I Sell Part of my Mortgage Note? I don't want to sell the whole thing!
Owner Financing doesn’t have to mean waiting years or decades to receive money.
Sellers have the choice to sell all or just part of their future payments for cash today.
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 Full Purchase
For example, a note has a balance of $90,000 at 9.0% interest payable in monthly installments of $1,140.08 with 120 months (or ten years) of payments remaining. When the seller sells all 120 remaining payments of $1,140.48 to an investor it would be considered a full purchase.
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.
So What Option Is Best When Selling Mortgage Notes?
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.
Please contact us if you would like to discuss the options available on your owner financed mortgage note.
www.OwnerFinancedMortgageNotes.com
Comments (2)
Lets hypothetically use a car as an example of a private property but it has a mortgage like a home.
i sell the car for $23000 plus 11.2%int for a period of years, lets say 5 years.
i then collect $3000 down payment from the tenant buyer. I now have a note for 20k plus 11.2%int
I now sell a partial note to an investor 10k and they get the 11.2%int.
If tenant 1 defaults on the loan. lets say at 5k worth of payments. Since I own the car and the note:
CAN--- I can now re-contract a new tenant for another 23k, collect the 3k as a down payment. leaving tenant 2 to pay off 20k.
WHICH would intern all tenant 2's new cash flow will continue to pay off the investor's other 5k and 11.2% interest.
AND When the investor is paid in full, their initial 10k + 11.2%int ($11,120), the 2nd tenant still has another 10k + 11.2% to clear the note.
CAN I because i still hold the note collect that 10k and interest?
I know IF all of this its true it have to be in a contract.
Samson Taylor, over 8 years ago
We would look at the mortgage note, the payment history, the property itself, and the payors already making the payments... we put everything into our own special little mortgage note qualifications.. if the mortgage note passes, we make an offer to assume the payments from the private seller.
Mark, over 11 years ago