What is a Mortgage Note
A mortgage note is a type of promissory note showing the terms of an owner-financed sale of a property. The terms include the interest rate, duration of payments, payment amount, due date of first payment, what happens in case of a non-payment, etc. A mortgage note is sometimes called a real estate note, a deed of trust note, or simply a promissory note — they are basically the same for most purposes. A contract for deed is similar in most respects to a deed of trust or mortgage, though it is uncommon in most states. The note is the “I.O.U.” while the deed of trust or mortgage pledges the property as collateral for the sale.
Should I Keep or Sell My Mortgage Note?
As a person who owns a mortgage note, you are already familiar with the benefits of having a note. There are advantages to receiving regular (and hopefully, on time) payments coming in on a regular basis at a good interest rate. If you have the time to manage the note and have plenty of cash in reserves, you may like having that note.
However, there are also numerous risks associated with carrying a note. What happens if the buyer loses their job or goes through a divorce and stops making payments? Is the buyer staying current on property taxes and insurance, as well as maintaining the property? Will the buyer still be able to make the payments in 5-10 years? If the buyer defaults, are you prepared to spend thousands of dollars and wait many months going through the foreclosure process?
If you are considering selling your note, call a mortgage note buyer like Seascape Capital to understand the best options. You may decide to sell just some of the payments rather than the full note, but get informed first so that you can make the best decision for yourself.
What is a Partial?
A partial is simply selling only a certain number of payments to a note buyer. For example, let’s say that you own a note with a balance of $100,000 and that has a term of 30 years. However, you only need $25,000 now to pay off some debts or to make other investments. In that case, the company that is buying your note may offer you $25,000 to buy, say, the next five years of payments, with you receiving all of the payments after that. Some of the advantages to selling a note this way are that you usually make more money overall, have the flexibility to sell more payments in the future, and may have tax advantages by deferring capital gains. An excellent note buyer like Seascape Capital can help you in just selling as much of the note as you want and in comparing the various options.
Finding an Excellent Note Buyer
Note buyers like Seascape Capital can help you to understand the value of your real estate note, as well as make offers to buy all or part of your note. An excellent mortgage note buyer is one who can not only get you a great price for your note, but will also provide you with great service and provide the utmost integrity. Here are five ways to make sure that a note buyer or note broker is right for you:
- Experience – Does he or she seem to know what they are talking about and have they been buying notes for at least five years?
- Licensed – Does the person or company have a real estate broker license? While that is not required in most states, a license shows more professionalism and a higher level of competence.
- Accreditation – Has the Better Business Bureau or a similar organization given high marks to the note buyer. Again, this is not legally required, but does indicate more trustworthiness.
- Clean history – Use your favorite search engine, such as Google or Bing, to investigate the history of the note professional and make sure that there is no history of poor behavior.
- Gut feel – When you talk with the person, look at their website, or read their materials, does your heart tell you that this is someone that you can trust and easily work with?
One BIG mistake that some note sellers make is to sign up immediately with the note buyer offering them the most money. While everyone wants to maximize the amount of cash they are getting, all that matters is what you receive in the end. Any company can offer a lot of money, but make sure that note buyers with whom you are dealing meet the above criteria. Ask lots of questions to gauge the mortgage buyers competency and integrity.