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Mortgage Note Investing Explained

December 22, 2021

What is Note Investing?

Broadly speaking, mortgage note investing is the practice of purchasing real estate notes for the purposes of generating profits. that could mean profit from interest payments, or profits gained from the sale of the real estate or of the note itself.

A real estate mortgage note is a promissory note secured by a mortgage loan. It’s a way of saying promissory notes secured by a piece of property. That security instrument can be either a mortgage or a Deed of Trust. It depends on what state you’re doing business in or which security instrument you’re using.

When a home buyer or investor wants to buy a house but isn’t able to pay cash at closing, they get a loan. They pay part of the purchase price as a down payment and borrow the remaining amount from a bank or lending institution. In exchange for the money, the lender has them sign a promissory note and a mortgage.

A promissory note, often just called a note, is signed by the borrower and is a promise to repay a debt. This document outlines:

who borrowed money from whom,
how much was borrowed,
the interest rate of the loan,
the timeline for loan repayment, and
what happens in the event of default.

A mortgage is a separate document that collateralized the lender. In short, it says that the lender can take possession of the home if the borrower stops paying. It outlines:

the roles and responsibilities of the lender and the borrower,
what would qualify as a breach in the agreement, and
what property the mortgage is tied to.
These two documents do different jobs, but they go hand-in-hand. You would never create or buy a note without a mortgage and vice-versa.

Different Types of Real Estate Mortgage Notes

There are both commercial and residential mortgage notes, and both are open to investors. They’re both promissory notes secured by a certain property. All mortgage notes should specify the roles and responsibilities of all parties and what qualifies as a breach of the agreement. One of the major differences between real estate mortgage notes is the loan terms.

Fixed-Rate Mortgage Loans

A fixed-rate mortgage or FRM is a loan that has a fixed interest rate and set payments. This is the most common type of mortgage offered by banks, but it can be offered by private individuals. The greatest benefit of this loan is that the borrower has the same payment every month.

The Graduated Payment Mortgage

The graduated payment mortgage or GPM has a fixed interested rate with adjusting payments. It typically has a low initial monthly payment that increases over time. These loans are sometimes used for student loans, but they can be found in real estate, too. This is a type of negative amortization loan. There is a risk that the person who purchased the home will be unable to make the later, higher payments.

An Adjustable Rate Mortgage

An adjustable-rate mortgage or ARM has an interest rate tied to some third-party indices. Banks will tie the interest rate on the adjustable-rate to the interest rate offered by the Federal Reserve, and the interest rate on the mortgage will rise and fall with it. This is why they’re sometimes called variable-rate mortgages. For consumers, the ARM may result in lower payments when interest rates are low.

A Balloon Payment Mortgage

A balloon payment mortgage is generally a fixed-rate mortgage with a large payment due at the end. This is in contrast with traditional mortgages where the final payment pays off the debt entirely. Balloon payments may be accepted by a borrower who can’t manage the monthly payments without them.

The Interest-Only Loan

An interest-only loan is a mortgage where the person only pays interest on the loan. Some people take out an interest-only loan because they can’t afford to pay on principle. This borrower demographic is very high risk. Yet interest-only loans are attractive because of the low monthly payments. This is a popular loan for property developers. You get the money to buy the property. You expect to sell it for a profit and pay off the mortgage note.

Advantages of Buying a Real Estate Mortgage Note

High Yield Returns – Rates of return that are higher than the bank’s traditional low yield bonds; and higher than most stock dividends.
Monthly Income – If you are looking for additional monthly income for retirement, for living expenses, or to build your savings account, we can help.
IRA Friendly – This investment provides investors with a way to put to use their self-directed traditional IRA or Roth IRA. We can recommend several custodian companies that handle the paperwork and hold your IRA while the funds are invested with us.
Rollover Option – Option to automatically roll over your investment so you don’t miss out on earning interest or future investment opportunities.

How to Get Started in Note Investing

So, how do you get started in mortgage note investing? Well, first you need to figure out what you want to achieve and what risk you are prepared to take. Are you looking for passive income with minimal risk? or do you want to risk more and go for the big wins?

You also need to continue with your education. That is a constant. The note investing game is very complex and full of nuances. Find yourself a mentor if you can, and when it comes to making your first note investment, start small.

Remember, note investing is not a magic bullet and it won’t make you rich overnight. Be wary of ‘educators’ that charge thousands of dollars for note investing courses. They are generally making their money from the fees you pay, not from actually investing in notes. All of the information you need is out there in the public domain.

You might find mortgage notes for sale by going through for-sale-by-owner groups and making offers to former property owners who are desperate for cash. Furthermore, mortgage notes may be sold by real estate investor groups or real estate investment trusts.

In the latter case, you could even buy a mortgage for a multi-family apartment building. If you are buying a nonperforming mortgage, investing in real estate notes is one of the cheapest ways to acquire such properties.

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Buy & Sell Discover How to Sell a Mortgage Note & Create Maximum Value Mortgage Note

What Are The Benefits Of Selling A Note?

December 9, 2021

Mortgage notes are the promising notes that are issued against a mortgage loan, wherein the note owner promises to repay the loan amount within the specified time span.

Now-a-days, selling and purchasing of mortgage notes has become a major part of real estate services offered by various investment firms in the US.

Selling mortgage notes is a favorable way of investment that comes with an array of benefits for both sellers as well as buyers.

Benefits of Selling a Mortgage Note

Note holders who choose to sell their private mortgage investment achieve a number of important benefits:

1.) They convert an uncertain stream of future note payments into an immediate lump sum of cash;

2.) They eliminate the risk, cost and hassle of needing to foreclose on the note in the future;

3.) By having cash and being liquid, they put themselves in a strong position to make a major purchase or investment;

4.) They will be able to pay off credit cards and other debts that are charging a high rate of interest;

5.) They won’t have to worry about the monthly payments they receive slipping away on life’s little expenses;

6.) They will liquidate their note investment while interest rates are still low and the market value of their mortgage is at its highest.

How Holding a Note Benefits the Seller

Though owner financed homes are not common, sellers would not hold notes if there was no benefit to it.

The primary benefit of holding onto a mortgage note is the monthly income. After the down payment is accepted, they’ll receive monthly payments, plus interest, from the buyer for the length of the contract. When you don’t require a large amount of money right when the home is purchased, holding a note is a great way to add an extra source of predictable income secured by real estate.

Offering the option for owner financing may also draw in more potential buyers. Without needing to work through the mortgage process with a bank, some buyers may be more attracted to your home and it could sell much quicker. Closing can take up to two months or more in some states when mortgages are involved, so holding onto the note allows you to potentially get your home off the market and money in your pockets within a few weeks.

Advantages for Note Sellers

If you’re a seller, you have to understand all the benefits that you can avail by selling your mortgage notes. These are simply listed below:

You can convert long-term investment into an immediate cash source.
This liquid cash can help you handle any financial crisis with ease and take advantage of quick investment opportunities available.
No sooner do you sell your note; you receive a substantial amount of money immediately.
You need not worry about property taxes or insurance premiums, as all these things will be handled by the private investor.
You need not worry about installments anymore.
You have an opportunity to increase the return you earn from the asset by reinvesting the sale proceeds in better performing financial products.
You get access to display your notes for sale and expose it to a large pool of investors. It increases the chances of selling your note at much higher prices.

How Holding a Note Benefits the Buyer

Holding a mortgage note also benefits the buyer. As mentioned above, the biggest advantage is not needing to deal with getting a mortgage from the bank.

This can be a long and stressful process for many families looking to move into a new home. With an owner financed property, buyers will be able to come to an agreement and move in much sooner.

It is also possible that owners holding the note will have more lenient qualifications, allowing buyers to purchase a home they may not have been able to otherwise.

If a buyer has less than a 20% downpayment, they will not need to purchase private mortgage insurance (PMI). This is required by many banks if the minimum downpayment is not able to be met.

Advantages for Note Buyers

Note investors or the buyers are the companies with the great financial abilities to purchase mortgage notes at a higher scale. They majorly purchase mortgage loans that are in the form of home loans or anything secured by real estate and they can be anything from $10,000 to millions. And another matter of fact is that all the dealings done by the note investors are done against cash, be it of any amount.
When dealing with private investors, selling and purchasing of mortgage notes is as easy as a piece of cake. When landing a good buyer investor, top real estate services and tremendous opportunities are offered to note investors in town, and help them to create solid returns with relatively low risk. Investors seek better opportunities and help them understand how it’s fruitful to invest in projects secured by real estate.

Each mortgage holder will have a unique set of reasons for selling their mortgage note investment. The benefits you enjoy will be your own.

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Why Do People Sell Mortgage Notes?

December 9, 2021

Why do people, especially homeowners, decide to sell their mortgage notes? What motivates them to sell?

The leading motivation for people selling mortgage notes is obtaining a large sum of money in a timely manner. For homeowners who need immediate cash flow, one option is to sell mortgage notes. Both private homeowners and real estate investors can sell notes to fund personal expenses or business ventures.

Depending on how much money you require, you can arrange one of these selling options with a buyer:

Sell the entire note.
Sell a specific dollar amount.
Sell a percentage of the mortgage payment.

Why Sell A Mortgage Note?

The most common reason people, specifically private mortgage holders, decide to sell their mortgage note is to get hold of a lump sum of money to handle immediate needs.

Selling a note is a decision that is not always right for everyone, but can extremely be useful or profitable for many people with notes.

Selling your mortgage note would achieve other financial goals. Here are some of the most common reasons people sell their mortgage notes:

Invest in new real estate ventures.
Moving money to a different investment.
Obtaining a lump sum of cash
Build up emergency savings.
Stash extra money for retirement.
Pay off medical bills.
Pay off student loans.
Buying a house
Afford expensive home renovations or repairs.
Funding a family milestone, such as a college education or wedding
The need to divide an estate
The need to divide marital assets, which include a mortgage note
Concern about the risk of being a lender
Sometimes a homeowner turns to offering a private mortgage note to sell a house quickly, because the buyer is able to then bypass the traditional bank mortgage approval process. In these cases, the new note owners can sell the note quickly to receive the lump sum they needed all along.

So Why Should You Sell Your Mortgage Note?

One of the benefits of owning a private mortgage note is that it’s an easy investment to quickly liquidate. Some owners find that they’d rather have a large lump sum in lieu of a slow trickle of scheduled payments. Other owners sell a portion of their future payments to get a lump sum to handle a sudden financial need.

Why Would I Want to Sell My Loan for Immediate Cash Now?

When you convert part or all of your loan into cash, you gain several advantages in addition to immediate cash:

1.) You don’t have to worry about the payments you receive each month slipping away on life’s little expenses.

2.) You receive a substantial sum of cash right now, enough to accomplish some important goals.

3.) You don’t have to worry about collecting monthly payments or servicing your contracts; we handle all of that.

4.) You don’t have to worry about whether the taxes and insurance premiums are paid each year to protect your investment; we handle all of that.

5.) You don’t have to worry about whether your Borrower will continue to make his or her payments.

5 Reasons to Sell Your Mortgage Note Now

Those items aside, here are the top five reasons to seriously consider selling your note for cash today.

1.) The Housing Market is High

We have been there before haven’t we? You really don’t need a crystal ball to predict what is going to eventually happen.

Whether you want to call it a “crash” or a “correction,” the bottom line is that it can affect your pocket book if your payor becomes upside down in the property and ends up owing more on the note than the property is worth.

2.) Interest Rates Are Low

We have had a long run of banks lending money again. And buyers have been taking advantage of low rates.

Meaning, at this stage of the game, you most likely should have had a cash buyer or one that qualified for a bank loan. At the very least, if you charged a good interest rate, your payor should have seriously considered refinancing.

It could be time to cash out and keep your money.

3.) Stability

Let’s face it, the world is moving at a much quicker pace than it used to. The stock market moves the second a politician says something. Trade wars could go in our favor…or not.

All this turmoil makes for a lot of variables that don’t work in your favor. Don’t get us wrong…it could go very much in your favor…but it is a great unknown.

The question to ask yourself is would you rather roll the dice on the future economy, or ‘cash out’ and budget based on what you know you have?

4.) Seize the Day

The future is no place to place your better days. Maybe it is finally time to go on that trip to Europe, on a Caribbean cruise, remodel the house, or simply take a quiet family vacation on the lake.

Whatever you have been putting off for the future, maybe the future is now.

5.) Re-Align Your Goals

It is possible that you never really wanted to carry back a note in the first place, or it didn’t quite work out the way you hoped.

You don’t owe anybody any reasons for the change. We get it. Life happens. Situations change.

No matter what your reason for selling your note, we are here to help with a No Obligation Quote on what the fair market value of your note is today.

Did any of those reasons ring true to your current life situation? Are you thinking, “It’s time to sell my mortgage note.”? If so, request a FREE quote today and find out the value of your mortgage note. We have cash for your note now!

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How To Make Money Selling Real Estate Notes

November 5, 2021

How To Make Money Selling Real Estate Notes

Investing your money in different asset classes and securities, such as selling real estate notes, not only protects you from market swings, it can provide another practical way to increase your income stream and build wealth. Beginner and experienced real estate investors turn to real estate notes because they’re profitable, secure, and generate passive income.

Selling Real Estate Notes – How’s It Done?

The process of selling real estate notes is simple. Many companies or private investors are willing to buy your mortgage note and take on risk because these are collateral-backed securities.

Once you decide to work with a company or investor that buys mortgage notes, you reach out to them 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.

Your selling options are not limited to the total amount you have to sell. You have the following selling options under your belt:

Sell your entire mortgage note, so you stop receiving mortgage payments and get cash now.
Sell a specific dollar amount, so you receive a lump sum of cash now in exchange for giving up some, but not all, of your future mortgage payments.
Sell a percentage of each scheduled payment, so you continue to get smaller payments and a lump sum of cash now.

Get The Best Value From Your Mortgage Sale

A couple of insider industry tips that could help you get the best value out of selling your real estate note. Remember that 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.

Tips For Selling Real Estate Notes

Contracts that include a building and land are more likely to be approved.
You may receive more value if you sell only a portion of your note.
Sell payments due in the next few years to get higher value.
Notes with shorter overall terms will receive a greater cash value.
It’s easier to sell notes with clear terms in the deed and promissory note.
The value of your mortgage will increase when low interest rates dominate the market.
It will be difficult to sell a note if a borrower has missed note payments.
If a borrower has excellent credit, your discount rate will be smaller.

How Much Is My Note Worth?

How much money, do you think, will you receive for your payments on selling your real estate note? Check out the factors that determine the value of your mortgage note once you decide to sell. You can find most of this information on your promissory note and deed of trust:

Factors That Determine Note’s Value:

Underwriting pay history (credit rating of the borrower)
Property appraisal
Clear title
First position
Date, amount and interest rate of remaining payments
Length of mortgage term
Down payment amount placed on note

Expanding your income with selling mortgage notes is a practical way to expand your real estate holdings. The risks are low since the property provides security, returns exceed those of other asset classes and the profits receive favorable tax treatment.

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Mortgage Note Investment | An Overview

October 25, 2021

Mortgage Note Investment | An Overview

Mortgage note investment or real estate note investment is a real estate investing strategy that might be appealing to beginner real estate investors for its obvious simplicity compared to buying a rental property.

Most newbie investors in the real estate business start with a traditional method like rehabbing or buying and holding single-family rentals. They might also invest in commercial real estate like apartments, storage, or strip malls, too.

Depending on how you manage the assets, these methods of investing can be great ways to generate income, receive tax benefits, and build wealth — but they aren’t the only ways.

Mortgage notes are an alternative advantage category within active real estate investing. They have many benefits and present unique opportunities. They also earn higher-than-average returns for real estate investments.

What Is A Mortgage Note?

Mortgage notes, or real estate notes, are legal documents that describe a loan and create an obligation for it to be repaid. It is a document that ties real property to the note as collateral for the loan. A note defines how much money was borrowed by whom, from whom, and it defines the terms of the borrower-lender agreement. For instance, it states a time frame for repayment and the rate of interest to be collected by the lender.

What Is Mortgage Note Investment?

Real estate investors make money with mortgage note investing through buying mortgage notes from lenders who no longer want them. Essentially, they purchase the debt. As a result, the investor is able to collect mortgage payments and interest much like banks do.

When you buy a mortgage note and mortgage, you’re buying the debt that remains to be paid on the note, secured by the asset outlined in the mortgage. You’re not buying the property — you’re buying the debt and secured interest in the property.

Essentially, a note buyer steps into the shoes of the bank. You can now collect the remaining debt on the note and receive the monthly payments. You can also take legal action to regain title in the event of default.

While many loans are bought and sold at full price, some can be bought at a discount. If the loan is nonperforming, or the note holder needs to sell the note badly enough, they may be willing to part with it for less.

Benefits of a Mortgage Note Investment

The benefits of a mortgage note investing are definitely attractive and some real estate investors are able to make this method work for them.

With mortgage note investing, you can reap the following benefits:

Truly passive income (you don’t have any of the hassles of maintaining an investment property).
The chance to help homeowners retain their property by being flexible with terms.
Lower on-going expenses (most investors hire a servicer to handle the note for a small, usually $20-$50 monthly fee).
A potentially higher return on investment, as you can negotiate your own interest rates.

Disadvantages of Mortgage Note Investment

On the other hand, mortgage note investing is a risky business that is not suitable for most people who are looking to get into real estate.

Some of the downside to real estate note investing include:

There’s always a risk that the borrower will default. As with all credit investments, the danger is that the borrower will stop making payments.
It is difficult to determine the profitability of a particular note investment because there are too many variable factors. Unfortunately, an investor cannot determine this factor before purchasing a mortgage note.

Investing in real estate notes is generally the purchase of an existing mortgage. And when you purchase a mortgage note, you become the lender. You have all the rights of the lender. You don’t own the real estate, but you have a right to take the collateral if the borrower doesn’t pay.

Whether you’re curious about investing in notes yourself or partnering with a private investor such as Mikk Sachar here, we are always willing to jump on a quick call to help point you in the right direction.

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Selling Real Estate Notes – How To Maximize Your Value

October 18, 2021

Selling Real Estate Notes – How To Maximize Your Value

Before we discuss what it takes to selling real estate notes, it’s important we understand exactly what a note is. Truth is, there are a vast amount of people looking to sell real estate notes that are simply worthless. Your’s could be as well if you don’t understand the following basics.

Without the correct understanding of a real estate note and having the correct, legal documents in hand, you could find yourself barking up the wrong tree if you desire to sell a mortgage note.

For a thorough understanding of mortgage notes and everything you must pay attention to if you’re ready to sell a real estate note, please read on.

First Things First, What Is A Note?

A mortgage note (also called a real estate note or promissory note) is a legal contract between a borrower and a lender that obligates the borrower to pay the loan/mortgage off in a given time frame. The contract creates a lien by pledging real property as security for a debt. Mortgage notes go hand in hand with the deed of trust note, which transfers ownership of the property from the seller to the buyer.

Simply put, it is a legal document that serves as an IOU from a borrower to a creditor or an investor.

For the actual legal mumbo jumbo definition of a mortgage note, you can also visit this mortgage note definition here.

What Information Is Needed to Create a Mortgage Note

The creation of mortgage notes can be confusing because in general they contain a lot of paperwork. However, a simple checklist as below can serve you well if you plan to create a mortgage note yourself.

In general, in order to create a legally binding mortgage note, you must have at least the following information in your contract.

The total $$$ amount borrowed.
The interest rate being charged on the note and whether or not it is a Fixed or Adjustable rate.
The date payments are due.
The loan term. Is it for 30, 20, or 15 years or somewhere in between?
The place where payments are to be made.
Payment schedule. Are the payments to be monthly or bimonthly?
Is there a balloon payment? Meaning, are you obligated to make a much larger payment in the future versus your normal monthly payment?
Is there a prepayment penalty on the loan? Meaning, will you be penalized if you pay off the loan too early?
Down payment? Does the mortgage require a down payment? If so, how much?
Late payment consequences? What happens if you don’t make your monthly payment on time?

Simply put, in order for a proper mortgage note to be created, it must have at least the above items addressed somewhere in the paperwork. Believe it or not, there are people who create mortgage notes which they one day hope to sell but they don’t address all the important factors above.

If not done properly, the mortgage note you created could be worthless. This is why it’s in your best interest to use a qualified attorney to create your mortgage notes.

What Are The Different Types Of Mortgage Notes

There are several types of mortgage notes in existence. To make the understanding easy however, mortgage notes can be broken down into the following sub categories:

Secured
UnSecured
Private
Institutional

A Secured Note is one which is considered to be collateralized which simply means there is a tangible asset tied to the note. In other words, if the borrower enters into a secured note contract and fails to abide by the note terms, the lender can take legal action to take ownership of the real estate or asset that was used as the collateral.

In the world of mortgage notes, the real estate associated with the contract is the collateral. In the world of a car note however, the car is the collateral. In general, anything can be used as collateral when creating a secured note.

An Unsecured Note on the other hand is pretty much the opposite of a secured note in that there is no asset pledged as collateral for the note. As such, an unsecured note is understandably riskier than a secured note.

A Private Note is simply a note created by a private individual. For example, if you were looking to sell your car to someone in the form of payments rather than a lump sum amount, when and if you created a note to legally bind that contract, you basically created a private note.

If you were to create a Private Note when selling a home, it is also sometimes referred to as a seller carry back or seller financed or owner financed notes. These types of notes are typically common when and if a seller has a lot of equity in their home at the time of sale.

When creating private notes, one has a lot more leeway in the terms of the note and the primary subject of this article is going to be about the sale of private notes.

An Institutional Note however, is pretty much the opposite of the Private Note, in that it is created by institutions such as banks or credit unions. When thinking of mortgage notes, this is what most people are referring to. Institutional notes must adhere to much stricter guidelines than private notes because they must comply with the Dodd-Frank Act and Bureau of Consumer Financial Protection regulations.

Why Would Someone Want To Sell A Note?

Now that you know the basics of what a mortgage note is and the different types of notes, let’s quickly cover why someone would want to sell a note. Before we continue however, I want to reiterate that the content of this article is mainly about the sale of private notes.

People look to sell their mortgage notes for a myriad of reasons. The most common reason however is that the note holder simply wants a lump sum of cash now rather than waiting for monthly payments.

The reason for wanting cash now could be a result of so many different reasons. The most common however seem to be the following:

Need cash now to pay medical bills;
Need cash now to pay down debt;
Need cash now to invest in an alternative investment that has a better yield;
Need cash now to buy another house. Perhaps when you sold the house with owner financing you were ok with that because you wanted to rent… but now that you are ready to buy another house, you need the cash;
Need cash now to pay for children’s college tuition;
Need to liquidate the asset because of a divorce; and/or
Want the cash now because you are worried about the guarantee of future payments

As you can see, there are numerous reasons why people want to sell their mortgage note. In the end however, it usually comes down to one thing. The seller simply wants a lump sum of cash. It’s usually as blunt as that!

How Exactly Do I Sell My Note?

Ok, so by now you have learned exactly what a mortgage note is and have decided you want to sell it.

Great… Now what?

Well, the next step of selling your mortgage note is pretty simple. You just need to find a buyer.

It just so happens I’m a buyer of mortgage notes and would love to make you a cash offer. To make the process simple for you, I’ve actually created an eBook titled “The Note Holder’s Guide” which provides you all the details you would ever need to know about mortgage notes and how to sell yours.

In the back of the ebook there is a Price Quote Form that you can complete and email to me at mikk@rehabvault.com and I’ll start working up an offer for you right away.

To get the ebook simply click here and fill in the form in the top right to download the ebook.

Here is a simple checklist of things you’ll need to sell your mortgage note.

Gather up ALL the documents you and your borrower signed when the mortgage note was created;
Fill in the Quote Form you receive with the above ebook and email that to me with all your supporting documents above;
Wait for me to contact you for any additional information I would need to get the offer ready;
Review the offer and decide if it works for you;
Once agreed, sign some simple additional contractual documents with me;
Wait to hear from me about a time for closing;
Go to the closing – or in most cases it’ll be done by mail – and enjoy the cash you receive delivered either through wire or overnight check

It’s pretty simple really.

How Much Is My Note Worth?

By now I’m sure you’re wondering how much your note is actually worth and how much cash you will receive.

It’s actually a great question and a very common one. Unfortunately there isn’t a simple and straightforward answer.

The reason is because the value of your mortgage note depends on several different factors. These factors range from:

What balance remains on the mortgage note compared to the collateral/home’s value?
What type of credit does the borrower have?
How much down money did the borrower give you?
What type of payment history does the borrower have?
How many years remain on the note?
What’s the interest rate on the note?
Is the rate fixed or adjustable?
Is there a balloon payment on the loan?
Is there a prepayment penalty on the loan?
Are home’s in the area increasing or decreasing in value?
What type of property is it? Residential? Commercial? Vacant Land?

As you can see there are a lot of different variables that affect what a note is worth. The best way to really discover what it’s worth is to submit a price quote form.

One thing I can tell you for sure however is this; when selling your real estate note, you won’t get 100% of the principal balance that remains on the note. Note buyers or investors are always looking to buy a note at some type of discount in order for the purchase to make sense as an investment.

How Can You Increase The Value Of Your Note?

If you’re ready to sell your note, here are some quick tips on making sure you get the best value for your note.

Make sure you have access to all the paperwork related to your note.
Make sure you can provide proof of your borrower’s payment history. If your borrower has perfect payment history, your note is worth more and vice versa.
Consider selling only a portion of your note rather than the full amount. This can be confusing at times but imagine your borrower has 200 payments left on the note. It’s actually possible for you to get cash and only have to give up 100 payments in the future. This is called a partial sale rather than a full sale.
Your note will sell for a greater percentage value if it’s for 10 years only as compared to 20 years. Shorter term loans sell for a greater percentage.
Make sure the note documents have very clear terms.
Your note will usually be worth more if the interest rate is higher than the prevailing market interest rates at that time.
If you have access to your borrower’s credit report, provide a copy to us so we can see it. Higher credit score borrowers will usually warrant a higher value for the note.

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How Much Is My Mortgage Note Worth?

September 9, 2021

How Much A Mortgage Note Is Worth?

Ever wonder how much a mortgage note is worth might once you decide to sell it?

Many factors affect how much a note buyer will pay for your mortgage note. These factors include the value of the property, as well as the payer’s equity, credit score and payment history.

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:

Value of Property
Equity from Buyer (Down payment)
Property Owner’s Credit Score
Payment History on Note
Recourse vs. Nonrecourse
Other Factors

Value of Property

The value of the property which serves as collateral on the note is one of the first things a note-purchasing company looks at. The current market value of the residential or commercial real estate listed on the note can increase or decrease the note’s market value.

Keep in mind that real estate values can fluctuate over time. The amount listed on the mortgage typically is not the same thing as the current value on the property, or the amount for which the property was last purchased. If you’re not sure of the current value of your property, online resources such as Zillow can provide a rough estimate. During the note-selling process, a more precise quote is given.

A factor which affects property value is the actual type of the property. Typically single family dwellings maintain higher values than other property types like condos or manufactured homes.

Equity from Buyer (Down payment)

The equity the real estate’s owner has in the property factors into the value of the note. This includes the amount of the down payment, as well as payments already received from the property owner.

Not only does this factor determine how much money one would receive, but also it identifies if the seller-financed loan can even be sold at all. The more money you collect as a down payment when you sell a property and create a promissory note, the more likely you will see interest in selling said asset down the road.

The down payment determines how much equity the borrower has in the property, thus determining how secure that loan would be as an investment in an investor’s portfolio.

Property Owner’s Credit Score

The higher the credit score of the property owner, the higher the value of the note. More creditworthiness in the owner means the person purchasing the payments is taking on less risk. Because the buyer of the note is assuming less risk, that money is passed on to the seller.

Ninety percent of the time, credit score comes into play when pricing a note for purchase. It would be wise to review the credit of the person purchasing a property from you, if you plan on creating a mortgage loan to sell to an investor.

Many sellers make the mistake of not pulling credit up front. Months or even years after the loan is created, they found out that the person making payments has credit so bad that the note cannot even be sold at all.

Payment History on Note

In order to receive top dollar for your mortgage loan, at least 6-12 payments must have been collected. We can still buy the loan if there are less than 6 months of payments made, but you may not receive absolute top dollar.

It is also suggested that you collect all payments from the borrower by check, direct deposit or money order. If you plan on not depositing checks or money orders into your bank account, always make photocopies for your records.

Payment history is usually the backbone to a loan sale due to poor borrower credit or lack of equity, or both. Always make copies. It is a good habit to get into if you are acting as a lender on a real estate receivable.

Recourse vs. Nonrecourse

The term “recourse” means the note has someone with whom recourse could be taken in the event the loan is defaulted upon. Though it does not bar it from being saleable, a nonrecourse note has significantly more risk, which degrades its value.

If the payer on the private mortgage is a corporate entity, trust or nonprofit, it helps to have an individual listed as the personal guarantee of the payer. By having a guarantee, it means the note has recourse in the event the entity, trust or nonprofit stops making payments on the loan.

Other Factors That Affect How Much Mortgage Note Is Worth

Interest rate and the length of a loan also help determine the value of the note. A higher interest rate and shorter loan term make for a more valuable note.

Interest Rate – Interest rate is a key mechanism of determining how much money one would receive if/when they sell a real estate note to an investor. The higher the interest rate, the higher the lump sum payment will be when the asset is sold.

Amortization / Pay-Back Period – The longer you stretch the payments over time, the less money you will receive when selling a seller-financed loan. The shorter the payback period, the more money you will receive. It is always recommended that you try to stay between a 10-year and 15-year payback period (or amortization) in order to receive top dollar for the asset you are selling.

Balloon Payments – When selling real estate notes balloon payments are viewed by some investors as a good thing and by others as too risky to buy. If you want to include a balloon payment, you will have to hire a licensed mortgage originator within the state where the property is located.

Though these are the main factors taken into account when a company purchases a mortgage note, it’s a complex situation. The best way to know the exact value of your private mortgage note is to speak with a private investor such as Mikk Sachar.

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Discover How to Sell a Mortgage Note & Create Maximum Value How Much Is A Mortgage Note

Best Ways To Sell Your Mortgage Note

September 9, 2021

Best Ways To Sell Your Mortgage Note

If you are a private mortgage holder and would love to get a lump-sum of money for your mortgage note rather than monthly payments, you have got to learn some simple, easy steps to the best way to sell your mortgage note that will get you the most profit from selling your mortgage note.

The process of selling a mortgage note is an easy, straightforward process between a note owner and a note purchasing company, much simpler and smoother than a regular mortgage deal. In less than a month you can have cash in your hand.

Get the Best Value from Your Mortgage Sale

Here are some insider tips for getting the best value on how to sell your mortgage note. Because not all mortgage notes may be priced for the same value. While some are difficult to sell, others can be purchased with a low discount rate, which means you get more money.

Contracts that include a building and land are more likely to be approved.
You may receive more value if you sell only a portion of your note.
Sell payments due in the next few years to get higher value.
Notes with shorter overall terms will receive a greater cash value.
It’s easier to sell notes with clear terms in the deed and promissory note.
The value of your mortgage will increase when low interest rates dominate the market.
It will be difficult to sell a note if a borrower has missed note payments.
If a borrower has excellent credit, your discount rate will be smaller.

How To Sell Your Mortgage Note

Now that you’ve decided to sell your private mortgage note, all you need to do is just follow these few easy steps:

Deciding to Sell
Selecting a Note Purchasing Company
Getting Your Quote
The Property Evaluation Process
Closing the Sale, Getting Your Money

Step One: Deciding to Sell

The process starts with the decision to sell your mortgage note. A few of the reasons you might want to sell would be to unburden yourself from note management, or to free up the capital cost to invest on a different venture.

Many people start the process by searching for information on what their note is worth in the open market. If you’re interested in selling but not sure whether your note is saleable, the answer is probably yes.

Step Two: Selecting a Note Purchasing Company

The next step is choosing the company to whom you would like to do business with. Selecting a mortgage note purchasing company determines the level of customer service and expertise you’ll have access to during the process, as well as the amount of money you’ll be able to get for your note.

Step Three: Getting Your Quote

Once you’ve chosen a reliable company that you plan to sell your mortgage note to, you’ll then be wondering how much is your mortgage note worth.

First off, ask for a free quote from the purchasing company for how much they can offer for your mortgage note.

Provide a copy of the following documents: Promissory note, Title commitment, and Closing statement. With this information, the purchasing company will be able to provide you an accurate price quote for your mortgage note.

Step Four: The Property Evaluation Process

In this step, the purchasing company does an appraisal process where a full evaluation is done to find the current property value of the real estate. This typically happens through a Broker’s Price Opinion or, depending on the situation, a Drive-by Appraisal.

Also in this step, a title company examines the legal history of the property. This process checks for any claims, liens, easement rights, unpaid taxes and other restrictive legal statuses.

Step Five: Closing the Sale, Getting Your Money

In this last step, this is the point in which the property owners are informed of the sale of their mortgage. We reassure them that their mortgage remains the same and let them know where to send future payments.

To finalize the sale, you need to attend a closing at a local title company to sign the final paperwork. The closing paperwork makes the sale official and transfers ownership of the note.

After we get the forms from the title company, typically the same day as closing, we wire the money directly to your bank account.

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Discover How to Sell a Mortgage Note & Create Maximum Value

How to Maximize Your Mortgage Note’s Value With Iron Clad Record Keeping

December 4, 2018

Ok… this is ONE of the VIP tips that most note seller’s value the most. How to maximize your mortgage note’s value by simply keeping good payment records. Can’t get much easier than that can it?

Simply put, keeping a detailed, well-organized and legible payment record showing the date each payment was received, and a breakdown of the principal, interest and late charge for each amount received is important to maintaining the value of your mortgage note.

If you ever decide to sell your real estate note or contract for deed, you will be required to show the mortgage payment history to a prospective note buyer so the note buyer can verify the payment patterns of the note payor.

If the payments on a “seasoned” note, which is a note with a payment history over an extended period, have been made consistently on time, the value of the note will be greater than if the payments have been late or delinquent because the perceived risk of the note is lower.

Use the payment record sheet in the back of “The Note Holder’s Guide” to keep a record of your note payment history. If you don’t have it, click here to get the Mortgage Note Holder’s Guide. Also, make sure to print out an amortization table for your loan amount. Go to www.bankrate.com to obtain a printable amortization schedule.

Another good way to keep good record keeping of your mortgage note payment history is to use a mortgage servicer for your mortgage note. That way you’ll have a professional record of your mortgage note’s payment history. This is even better than keeping your own records so definitely consider that if you want to maximize your mortgage note’s value.

As you know by now, I’m a professional mortgage note buyer. If you’d like to sell a mortgage note, simply get in touch through the contact me page.

Thanks for checking out this latest post from sell my mortgage note for cash

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Discover How to Sell a Mortgage Note & Create Maximum Value

How To Create The Perfect Note With 10-10-10!

December 2, 2018

Hey again and thank your for visiting SellMyMortgageNoteForCash.com. Today, this blog about how to create the perfect note could be one of the best blog posts ever so pat yourself on the back for reading this one.

I know I know.. you think I’m exaggerating. Well… you couldn’t be more wrong when it comes to selling a mortgage note.

The 10 – 10 – 10 mortgage note principle or what I sometimes like to call the Power of 10 is probably one of the most important factors in maximizing your note value. There’s even a video tutorial on what I mean.

In the meanwhile, let me explain What exactly am I talking about when I mention the power of 10 or more accurately 10 – 10 – 10?

The three 10s refer to the following 3 factors which play a crucial role in determining a mortgage notes value.

#1 – Down Payment

#2 – Interest Rate

#3 – Repayment Term

Here’s why the number 10 is so important when it relates to those 3 factors for a mortgage note.

In a perfect world, you would be creating a brilliant mortgage and maximizing its value if you could pay attention to the number 10 for the above 3 factors.

Here’s what I mean.

First things first, you want to create a morgage note where the buyer/borrower puts at least 10% down on the property.

Second, you would be creating a very attractive mortgage note for sale if you could get the borrower to pay a 10% interest rate.

And…

Thirdly, if you can get the term of the mortgage loan to be no more than 10 years, you have in essence hit the trifecta of creating a mortgage note with great value.

Of course it may be difficult to create a mortgage note with all 3 factors in place but if you are in a position to create a mortgage note and you want something to shoot for, always remember the 10-10-10 principle and it will always steer you in the right direction.

So there you have it. The perfect recipe to create a mortgage note of maximum value to the open mortgage note buyers out there. I hope you enjoyed this latest post from Sell My Mortgage Note For Cash.

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