A mortgage note is used when individuals purchase real estate by obtaining a loan through a lender. Mortgage notes contain information regarding the real estate transaction such as principal sum, interest rate, length of the note, monthly payment amount, prepayment penalties and stipulations of how the property is to be used; e.g.; primary residence or rental property.
A mortgage note can be sold to mortgage buyers in exchange for a lump sum cash payment. Multiple reasons exist to sell mortgage notes. The most common is to obtain quick cash to get out of debt, college tuition, or use funds for real estate or financial investments.
When mortgage notes are sold, buyers assume monthly payments. The majority of promissory notes are sold to real estate investors. Many elements are involved with transferring mortgage agreements.
First, a buyer must be located. Next, information regarding the lending note is presented to the buyer. Investors determine the current market value of the secured note and compare it to the outstanding balance and interest rate. Variables are calculated to establish an estimated return on investment.
When investors are interested in buying mortgage notes, an offer is presented to the note holder. Buying and selling notes generally involves multiple counter-offers before a final discounted rate is accepted.
Upon acceptance of the mortgage agreement, additional documentation is exchanged between buyers and sellers. Investors require sellers to provide financial documents, deed of trust, property tax records, homeowners insurance and amortization schedule.
Properties should be appraised by a licensed real estate appraiser. The expense of home appraisals is generally paid by the note holder. Occasionally, buyers will cover appraisal expenses. Terms of all real estate related expenses should be outlined in the mortgage transfer contract.
Some real estate investors engage in drive-by broker price opinion inspections. BPO is an economical way to obtain estimated property values. BPOs include information regarding the property's square footage, number of rooms, lot size, property type and condition.
The final step involves executing an Assignment of Mortgage. This legally-binding document is filed through the court and transfers all or part of future payments to the note buyer. The original installment note remains in the original borrower's name.
Mortgage notes can be sold in whole or part. When a partial home mortgage is sold, a Partial Purchase Agreement must be attached to the Assignment of Mortgage. The document includes terms of the partial transfer. Once terms are met, the mortgage note transfers back to the seller.
Buying and selling cash flow mortgages can create win-win situations for all parties involved. As with every real estate transaction, both parties should engage in due diligence prior to signing legal documents.
If you need to sell your mortgage note, fill out our real estate notes form to provide information about your property. We will be happy to review your offer or submit it to our list of nationwide investors.
If you would like to learn more about buying and selling mortgage notes visit our cash flow notes article library. Take a moment to subscribe to our mailing list and receive instant notification when new real estate and mortgage articles are published.
Published on November 10, 2009 at 02:21 AM | Comments: 2
| | Printer friendly