Private Mortgage Owner Financing

For starters let me state the apparent. If you sold a house or commercial property and are holding the owner financed for the purchaser, you have a valuable asset that can be marketed. This as any other financial asset has a risk and a value (value of the future income stream ) that you can sell to other individuals or investors. Or if you own a house you need to sell, you can offer owner financing to get top dollar for the home, sell the property and then you can sell the note you are holding in a simultaneous closing for an instant payoff.

Many note investors make the mortgage note purchasing process a mystery. And while not every private mortgage buyer has the same requirements just like a stock mutual fund there are five principal elements that affect the price they will pay for a private note. I have listed these below.

These include:

1. The amount of equity in the real estate as determined by on its appraised or estimated worth or sales price. The greater the , the greater the purchase price as there is a smaller amount risk for the buyer.

2. The amount of seasoning on the private note, meaning it's been around a good bit of time. In this illustration private mortgage investors are mostly looking for a good payment history. These private investors want to document that the private mortgage is being offered and the longer the time period, the better.

3. The rate of interest on the mortgage note. The higher the rate or spread as compared to a benchmark such as the ten year treasury, the greater the price offered. Private note holders should be keenly aware of this factor for their asset. If, as many gurus predict we go into a period of significant inflation due to all the government spending, the value of their private mortgage could decline significantly. (Time value of money.)

4. The amount of time left on the private note (or balloon period). While this will have an effect the value, many note buyers like longer time periods than others.

5. The quality of the credit of the borrower. Most mortgage note purchasers have set minimum credit score levels in order to purchase a note. Furthermore, these buyers will wish to to review the buyer's credit report for mortgage history, recent bankruptcies, etc.

Mortgage note investors will usually add a 6th issue, the size of the purchase price. The higher the dollar exposure, the less understanding these private investors will be on the buyer's credit, the amount of seasoning, etc.

One last word about the amount of seasoning, particularly as it relates to the sale of a mortgage loan note through concurrent closings. Obviously, selling a private mortgage formed from the sale of a home results in the lowest amount of monthly seasoning for a note. And while this would lower the price a note buyer is willing to pay, if there is a good down payment or combination of a solid down payment and the home seller is willing to hold a second mortgage, this type purchase can be a very nice deal for the home seller. This is due to the home seller 1) Being able to sell the residence much sooner, 2) Usually fetching top dollar for the house and 3) Not having to pay real estate sales person's fees.

So that's it, private note or mortgage loans selling exposed. I hope this article was of benefit.

Ron Stone has a note buying business. His company buys mortgage notes and help home sellers offer owner financing to sell their home fast and for top dollar while selling the private mortgage note at a simultaneous closing. Learn more about note buying and selling at Sell My Note or