Most people find themselves going for a mortgage note when they buy a new property as either they don’t have the lump sum to pay immediately or they want to pay partially to retain existing funds. The mortgage note is issued based on the common agreement of both the lender and the borrower on a set of conditions like the rate of interest, number of years and whether it is a fixed-rate mortgage or the balloon type.
If you own a mortgage note, you act like a bank. If the borrower doesn’t pay you money, you will own the property. But there will be times when you will need liquid cash immediately for various reasons like a new business venture, buying another property, or for other personal arrangements where you cannot wait for such a long period to recover your money. That’s just when the mortgage note will come handy.
One ideal option is selling the mortgage notes to real estate investors. They provide liquid cash by buying your owner-financed mortgage notes and land contracts. Here are some tips for selling mortgage notes to a real estate investor:
Select a Suitable Real Estate Investor
One of the most important things is to select a good real estate investor because you don’t want to sell the note for a very low price. There is something known as time value for money. This is quite simple and it goes like this,” receiving a dollar today is worth more than receiving a dollar in the future”. Many online tools can help you calculate the present value of a future stream of income. Select a real estate investor who provides a good deal on this time value of money as you cannot expect to get the outstanding principal from the investor.
Understand Payment Trends
Another key aspect before selling a mortgage note to a real estate investor is to understand the trends of payment of interest by the borrower. The real estate investor will check whether the borrower has made regular payment of interests and how much has he paid so far and what is the remaining outstanding amount. So, if your borrower has not made regular payments, then you have to disclose the reasons for delay to the investor and consider options available.
Check for Additional Charges
If the real estate investor is looking to add processing charges which are significant, it is better to reconsider you choice.
Evaluate the Current Worth of Your Property
Make sure the property you own increases in terms of its worth because no one would like to buy the mortgage note of a property whose prices have slid compared to the rate you originally bought it at.
Know the Process
All you need to do is call a suitable real estate investor and discuss your mortgage note. They will provide you with a quote based on actual note, payment history, any information that they obtain from a credit check and other due diligence on the payer of the note when the note was originally written. Within a day or two, the information provided is verified by the real estate investor and he gives you a fair market price for selling your mortgage note. If you agree to the price provided by the investor, they will close it for you by providing the check for your mortgage note.