2018.10.26 16:05 | Sean Carter
Private mortgage notes are increasingly becoming a popular investment product as more Millennials and other groups attempt to buy homes. Younger people are at a disadvantage when buying a home normally because many have a lot of debt from their education, which means their debt to income ratio is higher than banks like. Additionally, many younger people are still underemployed or working to make up for lost wages due to the recession of 2017.
Anyone who has purchased a mortgage note understands that the underwriting process can be very restrictive and nerve-wracking. Unless a person with less than stellar credit, a high-income ratio, or low down payment can qualify for a government program, like the FHA program, they more than likely will not be able to qualify for a mortgage. As Millennials represent the largest group of prospective home buyers, many home owners are deciding to finance the mortgage themselves.
A private mortgage note works kind of a like a mortgage you would get from a bank. It is a lien on a property that must be paid off completely before the property can officially be transferred. Instead of a bank, though, a private party (usually the seller of the property) holds the lien. The value of a private mortgage note will depend on a lot of factors, including the amount the property was sold for, how much is left on the lien, the credit worthiness of the buyer, the payment history, and the appraised value of the land.
Some mortgage note owners ultimately decide that it makes more sense for them to sell to a private mortgage note buyer. This will be a personal decision, but there are some factors that will make the decision much easier to make. For example behind the sale to a mortgage note buyer must be considered. If you actually need the money to pay down debt or take advantage of a new opportunity, you should consider selling to mortgage note buyer. Also, it the value of the mortgage note has reached a tipping point where you don't think it will go much further up, you should consider selling.
Just remember that you should always consider the mortgage note buyer and work with a reputable company when conducting a sale.