Facts About Selling A Mortgage
With interest rates near historic lows, now is an excellent time to sell a privately-held mortgage. The Mortgage Buyer, Inc offers important facts and advice to help you make informed decisions and receive the highest cash price when you sell a mortgage.
Facts to know when you sell a mortgage.
- Fact 1:
- Almost every mortgage can be sold, even mortgages where the payments are not being made on a timely basis.
- Fact 2:
- There are a number of companies that purchase private mortgages. Together, we create a very active and competitive market.
- Fact 3:
- Mortgage holders have a number of different sale alternatives available to them; each can be designed to help meet a specific goal you would like to achieve. For example, The Mortgage Buyer, Inc. offers customized mortgage payment options.
- Fact 4:
- Providing as much information as possible about your mortgage will help you receive the highest possible purchase price.
- Fact 5:
- These are the steps necessary to complete the sale of a private mortgage.
- The value of the property must be established by completing a drive-by appraisal.
- A policy of title insurance must be purchased on the mortgage.
- The outstanding balance of the mortgage must be verified with the Borrower.
At The Mortgage Buyer, we do all of the work and pay all of the expenses necessary to complete these steps.
As previously mentioned, with interest rates near historical lows there will probably never be a better time to sell a mortgage. You see, the market value of your mortgage is inversely related to the general interest rate environment. This means that as interest rates fall, the market value of your mortgage increases. And as interest rates rise, the market value of your mortgage decreases. If you believe that future interest rates are more likely to go up than down, now would be the right time to turn your mortgage investment into cash.
Tips for getting the best cash price.
- Step 1:
- It is important to have complete and accurate information available when you talk with mortgage investors. Locate your documents; including the mortgage, note and the settlement statement from the property sale.
- Step 2:
- Do your homework. Contact a number of mortgage buyers. Ask them how they do business, learn as much as you can and request a purchase proposal from each of them.
- Step 3:
- Make your decision about selling. If you decide to sell your mortgage, we suggest doing business with the company that offers you the best combination of price and service.
- Step 4:
- Enter into a purchase and sale agreement with the company you have chosen. Before you sign the agreement, be sure to understand who pays the transaction expenses and make sure you are not responsible for any charges if the sale does not go through.
- Step 5:
- The sale should be closed at a title company or attorney’s office. This is the best and safest option for you because it will provide a third-party closing agent to protect your documents and sale proceeds. The Mortgage Buyer offers this closing service to everyone we do business with.
Taking these steps will provide you with multiple purchase offers to consider and also provide some insight into the type of company you will be conducting business with. Choosing the best company to work with is as important as receiving the highest sale price.
Establish Market Value of your mortgage.
We recommend that anyone who wishes to sell a private mortgage first establish its “market value”. This can be accomplished by contacting a number of professional companies like The Mortgage Buyer, Inc. that purchase privately-held mortgages. Take the time to ask questions and discuss your individual situation. Provide all of the information they need to do a thorough job for you and be sure to request all purchase offers in writing.
The market value of an owner-financed mortgage is defined as the maximum cash price a mortgage holder can sell it for in an active and competitive marketplace. Fortunately for mortgage holders, an active and competitive market does exist for privately held notes. Online research will produce a large number of companies that purchase private mortgages. Of these, there are a handful of experienced and reputable companies that you have an opportunity to do business with. We recommend that you contact multiple mortgage buyers before deciding who to conduct business with.
The factors that mortgage investors will consider when evaluating your mortgage for purchase include:
- The type of property securing the mortgage. Everything else being equal, the market value of a mortgage secured by a single family residence will be higher than a mortgage secured by land or commercial property.
- The size of the cash down payment made at closing.
- The property’s current market value and the amount of owner’s equity the borrower has in it.
- The interest rate on the face of the mortgage.
- The number of monthly payments remaining on the mortgage. The time-value-of-money dictates that shorter term mortgages are valued more highly than longer term mortgages.
- The current level of interest rates. With market interest rates still near historical lows the market value of private mortgages has never been higher. If/when mortgage interest rates begin to rise the market value of fixed-rate mortgages will react inversely and begin to fall.
- One of the most important factors in determining the market value of a mortgage is the strength of the borrower’s credit score. Everything else being equal, the higher the borrower’s credit score is, the higher the market value of a mortgage will be.
Mortgage holders exploring the option of liquidating their mortgage should reach out to several mortgage investors for information. A few calls should be sufficient to explore your options. To help establish the market value of your mortgage, call The Mortgage Buyer at (800) 618-2485, or contact us via email, or complete our online mortgage quote form.