A mortgage note is simply a mortgage in which the person receiving the monthly mortgage payments is a private individual rather than a traditional lending institution like a bank, credit union, or mortgage company. The mortgage note, then, is basically a lien against the property that is, in turn, the collateral for the note. Sometimes, though, the holder of the note is better off with a large lump sum instead of the spread-out payments. So let’s look a little closer at what a mortgage note is and how to sell yours in New York.
Why Private Mortgages
The two main reasons for the rise in private mortgages are stricter lending requirements and not-so-good credit scores – mostly as a result of the recent recession. In addition, during that recession, quite a few properties were abandoned and, as a result, became distressed, which made it nearly impossible to get traditional mortgages to buy them because they wouldn’t have passed the inspections. Private lenders then stepped in to fill the gap.
Risks of a Mortgage Note
Although a mortgage note can be an easily liquidated asset, there are certain risks. First, because the note holder is acting in the same role as a bank, that person assumes the same risks a bank would. There is, of course, the benefit of earning interest, but there is always the potential for the borrower to default. So here are a few questions you need to ask if you’re trying to decide between continuing to hold the note or sell it in New York:
- Is the property likely to depreciate owing to neglect or a bad location?
- Will your financial situation be threatened if the borrower is late on payments or defaults entirely?
- Is the borrower (or homeowner) carrying the proper insurance so that you will be covered in the event of some disaster?
Why Sell Mortgage Note
One of the great advantages of owning a private mortgage note is that you can usually easily liquidate it by selling it to a company that specializes in such purchases. You can sell the entire note or a portion of it depending on your financial need. Common reasons for selling a mortgage note include:
- Getting out from under risk and worry of the borrower defaulting
- Desiring a different investment
- Paying college tuition
- Divorce requirements
- The need to divide an estate
- Needing capital to start a business
How to Sell Mortgage Note
Owing to the increase in private mortgages, there are now many investment businesses in the secondary mortgage note industry willing to purchase your mortgage note. If you do decide to sell your mortgage note in New York, here’s what the process involves.:
- Gather all the information and documents concerning your note: property information, promissory note, interest rate, payment history, borrower’s creditworthiness, and so on. The more information and documentation you can assemble, the better off you’ll be.
- Provide all the pertinent details to a company that purchases mortgage notes and get a quote.
- Consider the quote, accept or decline the offer, and submit the contract.
- Wait for the investment company to complete the due diligence and be prepared to verify previously submitted information.
- Close the deal and receive payment for the contracted amount/portion of the mortgage note.
There actually are no constraints on what amount of the note you can sell. It can be the entire mortgage note, a specific amount now and then payments again later, or a percentage of each scheduled payment. So selling a mortgage note in New York is fairly complex and can be somewhat confusing. However, we can provide the assistance you need.