A mortgage note is a promise from one party to another repay a mortgage loan. This promise is secured by a piece of real estate. So, if you have a home and you are paying the mortgage, you are making payments to someone who holds a mortgage note on your house, usually your bank.
If you happen to hold a mortgage note where someone else is making payments to you, however, you may be able to sell all or part of the note for a lump sum of cash. This is much like the selling of structured settlements or lottery payments that has been discussed in prior posts. If you sell the note, you give the buyer the right to collect future payments in exchange for cash up front.
The first step in selling your mortgage note is to shop around. An Internet search can produce numerous companies that buy mortgage notes. Using a service like Quote Me a Price enables you to get several quotes from interested buyers all at once. Examine prospective deals carefully. Look for the discount rate – a rate the buyer uses to determine how much he’ll offer for your mortgage – as well as any fees that you will be expected to pay, such as legal fees or processing expenses. Seeking a financial advisor to help evaluate offers is a great idea.
Much like the sale of other settlements, you can expect to receive less cash now than you would have received in total over the life of the mortgage. Note buyers do this to compensate for their operating costs, to justify the risk of taking on a stream of future payments, and also to make a profit. How does a buyer decide how much to pay for your mortgage? The buyer sets the aforementioned discount rate based on a number of factors, such as the creditworthiness of the mortgage payor; the type of the property (residential, commercial, industrial); the condition of the property; the appraised value of the property; the number of payments left in the mortgage; and the terms of the mortgage, especially the interest rate.
You should evaluate carefully the companies that bid on your mortgage note. Typing the company’s name into an Internet search engine can yield information about the companies courting you, but this is just a starting point. Also check the Better Business Bureau (www.bbb.org). Your State or District Attorney may have information on official complaints, if any, filed against prospective buyers. The economic downturn and nationwide foreclosure crisis has revealed countless cases of botched paperwork, unclear ownership of mortgage notes, and fraud, so take plenty of time to do this homework.
Should you take up an offer, what happens next? Details next post.
If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.
