Yes! You can sell only a portion of a mortgage note. It’s called a partial, and Sellers do it all the time.
How Do Partials Work?
Most people think about selling a real estate note in terms of the remaining balance: $50,000, $100,000, etc.
But, note buyers think in terms of remaining payments, and the value of each payment. For example – we may be more focused on 124 monthly payments of $1,000 each rather than the outstanding balance.
When you think of payments, you can sell your note “by the case” (sell all of your payments), or “by the bottle” (a partial).
The most common way to sell a note partial is to sell a certain number of upcoming payments, and keep the rest for yourself. Let’s say you sell 40 payments. For 40 months, the borrower will send payments to whoever you sold a partial to. On the 41st month, they’ll be sending payments to you again.
There are other options for partials too. Contact us and we’ll be happy to share.
Why Would Someone Choose To Sell A Portion of A Note Rather Than The Whole Thing?
The main reason a note buyer focuses on remaining payments has to do with time, and what time does to the value of each payment.
Money today is worth more than money tomorrow.
Because note payments tend to be for a fixed amount each month, the payments a buyer would receive in the short term are worth more than payments due years into the future. ($1,000 will buy more today than it will in 5 or 10 years.)
Hopefully, by now you’re understanding why partials benefit note sellers–because note buyers pay more for payments they’ll receive sooner. Therefore the discount on a partial will is smaller.
Which Choice Is Best When Selling A Mortgage Note?
Obviously if selling a portion of your mortgage note won’t result in the amount of money you need, or if you’re simply wanting to get the note “off your plate” or for some other similar reason, you should choose a full purchase.
A full purchase can give sellers peace of mind knowing they are through with the property once and for all.
However, when you can make a partial work for you, it’s usually the best option.
Will My Quote Include Different Options?
While we can’t speak for every note buyer, at Porch Swing Funding our free quotes include options for full and partial purchases.
Sometimes sellers have a specific amount they need to raise and ask us to quote based on that number. For instance “how many payments would you purchase for me to net $25,000?”
Please contact us if you would like to discuss the options available on your owner financed mortgage note.
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