A mortgage note is the legal document which outlines payment terms of a mortgage loan. Also referred to as a promissory note; mortgage notes include specific information such as the amount of funds borrowed, interest rate, repayment schedule, amount of monthly payment, and the person responsible for repayment.
Individuals who hold a mortgage note can elect to sell the paper to mortgage buyers in exchange for a lump sum cash payment. Although there are many reasons a person would choose to sell their mortgage note, the most common is to obtain funds to get out of debt. When a mortgage buyer purchases a mortgage note, they pay cash to the note holder and assume monthly payments.
When selling a mortgage note to private real estate investors, specific information regarding the note must be provided. The investor will require proof of the face value of the mortgage note, balance due, interest rate, amount paid toward the note, whether the note is current or delinquent, and the asking price.
Once the investor has reviewed the note and expresses an interest in purchasing it, he will make an initial offer. If the offer is acceptable, the original note holder will need to provide additional documentation to the investor. This generally includes a current tax return, title insurance and amortization schedule.
The next step of selling a mortgage note to a private note buyer involves having the realastate appraised. Generally, this requires he services of a professional appraiser. Occasionally, investors purchasing the mortgage note will cover the expense of the appraisal. However, this expense is generally the responsibility of the note holder.
Depending on the circumstances, some investors only require a "drive-by" inspection. Before entering into a contract with a buyer, be certain to clarify appraisal requirements and who is responsible for the cost.
An Assignment of Mortgage document must be executed in order to close the deal. This legal document transfers all or part of future payments to the note buyer. The Assignment of Mortgage document must be filed through the local court.
The original security documents remain in the original mortgage note holder's name. The Assignment of Mortgage document documents the number of future payments that have been sold. In cases where only a portion of the note is being sold, a Partial Purchase Agreement must be drafted. Once terms of the Partial Purchase Agreement are met, the mortgage balance reverts back to the original note holder.
Closing on real estate notes can take place in person or via mail. Upon approval, the mortgage note investor issues a check or electronically transfers funds directly into the original note holder's bank account.
Selling a mortgage note to a private investor can take a few weeks to a few months to close. When selling real estate notes and land contracts to private investors, be certain to engage in due diligence to ensure you are doing business with a reputable professional.
If you own a mortgage note and are in need of cash, contact Simon Volkov to learn what options are available. If you would like to learn more about selling mortgage notes, promissory notes or land contracts, feel free to browse our comprehensive mortgage note article library. New articles are added on a weekly basis, so please bookmark SimonVolkov.com and visit us often