Reasons to Sell a Mortgage Note

If you own a mortgage note, it’s likely bringing you a steady supply of income each month. That income can be nice, but it also comes with responsibilities and potential inconveniences. You need to handle collections and deal with late payments and the financial stress they can bring. Alternatively, you can pay someone to handle these issues for you. Sometimes, the hassle gets to be more than the income is worth. Other times, you just need a rapid infusion of cash.

Within these two broad categories of reasons to sell, there are several specific reasons why people sell mortgage notes. A lump-sum sale allows sellers of mortgage notes to address a variety of financial obligations.

What are the main reasons to sell a mortgage note?

The two primary reasons for selling a mortgage note are the need for an immediate cash infusion and the desire to eliminate the responsibility that comes with owning the note.

The reasons for needing a lump sum of cash are vast and diverse. Emergencies may crop up that require more money than you have on hand.

Maybe your life goals have changed, and saving to meet those goals would take longer than desired. In such cases, selling an asset, such as a mortgage note becomes a viable alternative.

Likewise, when investment opportunities present themselves, they require a relatively large amount of capital upfront .

Whatever the reason, selling a mortgage note can provide you with quick cash.

Collecting payments each month, dealing with unreliable borrowers, and keeping up with taxes and insurance payments takes time and energy. Many people reach the point where the desire to free up time and reduce stress outweighs the benefits of holding on to a mortgage note.

Selling a note is often the best option to eliminate the hassle of owning one.

Why sell a mortgage note?

Let’s take a closer look at how selling a mortgage note accomplishes some of the goals people have when they decide to sell.

A mortgage note brings in a nice stream of passive income. But there’s very little room for growth. Real estate is an investment, but the gains are only realized once you sell. Many other types of investment offer higher yields. If you’re investing in a business, there’s also the possibility for capital growth. The desire for an improved or faster return on investment is a common reason for people to sell their mortgage notes. It allows them to fund other opportunities that arise.

Capitalize on an Investment Opportunity

Sometimes, the passive income of the mortgage note is offset by other expenses. Debts and loans can deplete the income from a mortgage note just as fast as it comes in. Selling the mortgage note can provide you with the funds you need to pay your debt and eliminate the hassle of managing both the mortgage note and debt payments.

Pay off existing debt or loans

Life has a way of shifting our priorities. A child graduates high school and is ready to go to college, or a wedding and honeymoon suddenly become a priority. These are just two examples of new life goals that are both time-sensitive and expensive. If you haven’t saved enough for these major milestones, selling a mortgage note is a quick way to get a large chunk of the money you’ll need.

Accomplish a time-sensitive goal

Emergencies happen, and they can be costly. Unforeseen expenses put a strain on countless Americans every year. Mortgage note owners have a surefire —and expedient —way to get the cash they need to deal with life’s unexpected expenses.

Solve an immediate cash flow problem

If you’ve owned a mortgage note for a long time, you might have already experienced the strain it can put on your finances when the borrower is late on a payment. If a large percentage of your income comes from these payments, it can be a safer bet to sell the note and use the money to diversify your investments.

Diversifying your assets

Diversify your assets

Mortgage notes are sometimes inherited as part of an estate. It may be necessary to sell the note and distribute the proceeds among beneficiaries. Similarly, a couple in the middle of a divorce may have to sell a mortgage note so they can divide their assets.

Diversifying your assets

Dividing your assets

If you or a loved one are trying to qualify for Medicare or assisted living, you may have to sell your mortgage note to meet the asset limits.

Qualify for Medicare or an Assisted Living Program

When is a good time to sell a mortgage note?

While timing the real estate market is possible, even the best investors don’t have it down to an exact science. Local price fluctuations may influence the value of the property backing your mortgage note outside the scope of the broader market.

For all but the savviest and most experienced investors, the best time to sell your mortgage note is when you need the funds. In a perfect world, getting the timing right could increase your profit. However, the benefits of attempting to time the market are usually not worth the delay in receiving the lump sum of cash you could receive by selling your private mortgage note —or other type of asset that Deed Street Capital buys.

What is my mortgage note worth?

The sheer number of variables that affect a mortgage note’s monetary value makes it nearly impossible to give precise estimates. Ultimately, buyers are assessing the risk inherent in the investment when deciding how much to pay for a mortgage note. Each note is unique in regard to the factors that could increase or decrease the cash value of your note.

After a risk analysis, reputable buyers will typically pay somewhere around $0.70 on the dollar for the remaining principal balance.

Some of the factors that go into the decision include:

If the borrower defaults on the mortgage, the note buyer will be able to foreclose to get their money. The more excess equity available in the property, the less risk the borrower must assume.

Value of the property

Like traditional lenders, buyers of mortgage notes will look at the borrower’s credit history as a critical indicator of the likelihood that the buyer will continue making timely payments.

Borrower’s credit score

Before purchasing your mortgage note, a potential buyer may request a detailed history of all payments made by the borrower.

Payment history

The longer the loan term, the more time the buyer must wait to recoup their investment. Buyers may be willing to pay more for mortgage notes with shorter terms.

Amortization schedule

How can Deed Street help?

Deed Street Capital has the experience and expertise to help you determine the best time to sell your mortgage note. We’ll help you evaluate your current situation and cash-flow needs, and work with you to develop a strategy for selling your mortgage note in exchange for immediate cash.

For a free and convenient quote for the cash value of your mortgage note, contact us today!