Is it Possible to Get a Loan on a seller-Financed Note

[Olutomi Odukoya]

I seller-financed a house to a buyer. The note is for $135,000 amoritized over 30 years at 7% interest. The note originated on 1/1/2022. Buyer has made every payment. The house is now conservatively worth 142,000. Is it possible for me to get a loan on the note? I had some company offer to pay me $103,000 for the note last week. I'd rather a loan against the note to buy another property that I estimate to have a great return. The buyer is dear to me, so I don't want to sell the note and risk a stringent new person foreclosing on her. I live in San Antonio, Texas if that matters. If possible, how much do you think I could get a loan against the loan for? Which companies should I reach out to??

[Don Konipol]

It’s called hypothecating the note.  A few banks used to do it, but now I believe banks are only interested in financing loan portfolios at $1 million or more. There may be a few smaller community type banks that will be willing to make you a personal loan utilizing the note as collateral - but you’ll have to personally guarantee the loan.

There are note buyers that will purchase a partial, that is they’ll purchase a number of payments.  So you can sell say the next 24 payments for a lump sum and after 24 months the note reverts back to you.  If the borrower defaults you can make the payments to the note buyer yourself and collect it from the borrower or foreclose on the property.  This way you don’t give up control of the note which seems to be the issue.