2018.07.16 14:59 | Sean Carter
Private mortgage notes are typically owned by former home owners and real estate investors who have decided to finance the sale of their properties to a party that could not get a loan from a bank or other financial institution. This is more common than you think.
Consider all of the issues Millennials and younger Generation X'rs have to deal with. First and foremost, older Millennials entered the job market right around the time the market crashed in 2008. Many of them lost out on income then and are simply not at the same level financially as other generations.
They have less in savings and higher amounts of credit card debt. A bank will sometimes be willing to take a chance on a lendee that can put down a good amount of money down for a down payment even if they have issues with credit. However, many Millennials don't have the kind of savings needed. Additionally, student loans and a shaky job market have hurt Millennials in the housing market as well.
Homeowners and real estate investors who want to sell their property may ultimately decide that the best option is to lend the money to prospective buyer themselves through a private mortgage. They will then hold on to a mortgage note on the property (essentially a lean) until the loan is paid off. With the interest paid, it could actually be a good deal for the lender if the borrower does actually pay the loan off.
Unfortunately, sometimes this is not the case, which means trouble for the note holder as this will lead to a legal fight that could cost additional time and money. It could also be trouble for a note holder that wants to sell the mortgage note to note buyers for whatever reasons. A note buyer will not want to buy a note if the borrower hasn't been making payments or has had a shaky payment history.
This is just one of several factors that could scare off note buyers. If you are thinking of selling, please know that the amount of money left on the loan, the terms of the loan, and the value of the property will all affect the value of the note and could either strengthen or weaken an owners position when selling. Before you sell your mortgage note, keep these factors in mind so you know where you stand.