We frequently receive phone calls from people asking how much we’d purchase their $100,000.00 mortgage note for. Unfortunately, giving someone a quote on purchasing a mortgage is not that simple. The financial rules and regulations surrounding purchasing a mortgage are incredibly complex, and we are not able to accurately address inquiries like these without receiving specific information from the inquiring party.
When someone decides to sell their car, they know they are signing up for a process that is much more detailed and information-heavy than simply saying, “I have a Ford for sale. How much will you pay for it?” It’s imperative that potential buyers know details like if the vehicle is a truck or car, the year, model, mileage, condition, etc. Specific details give the buyer an idea of what exactly they are potentially purchasing.
A mortgage is very similar, especially an owner-financed note, and there are many factors that determine the value of a note.
What We’ll Ask About:
- How much your down payment was on the property at purchase – This helps us gauge how much a mortgage is worth now and how much equity a person has in the property. Equity is a big factor in determining the value of a note.
- How long have you been making payments on your mortgage (this sometimes is called seasoning) – The longer the payment history, the better the price —especially if your pay record is verifiably consistent—.
- What the interest rate you’re paying is – For example, if the rate is lower, the note price is typically going to be lower as well. We frequently see notes that are written at 0% interest. Obviously, we are not going to get near as much revenue for notes with no interest as we would for a note with 7% interest. You might be surprised that someone would choose to sell a mortgage with zero interest, but we see quite a few of these situations for many different reasons.
- What is the loan-to-value ratio – For example, what is the property securing the mortgage worth in relationship to the balance of the mortgage? If your property is worth $100,000.00
and the mortgage note balance is $80,000.00, the loan-to-value ratio is 80%. If the value is
$100,000.00 and the balance is $95,000.00, then the ratio becomes 95%. More than likely, the note with the 80% loan-to-value ratio is going to bring more money than the 95% loan-to-value ratio due to risk/reward.
- Good verifiable pay record – If we can verify your pay record by using bank statements, deposit slips or canceled checks, this really helps the process on our end, especially if the payer’s credit is a little weak.
- If the credit score is higher, typically that will add value to your note – Having a good credit score helps prove reliability and will normally increase the value of your note.
- The term of the note – Typically, the shorter the term the better. Balloons are accepted, but not preferred.
- What Type of Property Is It – Usually, a single-family-owner-occupied-home is the best and receives the best price, although we do purchase all types: Land, commercial, industrial, manufactured homes and land, and business notes.
- Geography – Location and geography can be important. If the property is in an area of appreciation, the note may have more value than if it is in a declining area where values are going down. Certain industries can also influence the note market, such as oil and gas.
- Employment – Employment of the payer can influence the price of a note and whether we can even purchase it. If the payers are out of work, it may be difficult or even impossible to buy the note.
- Documentation – Having the proper documentation can affect the price of a mortgage note either positively or negatively. We live in an environment filled with many complicated regulations and laws, so we always suggest having a professional prepare and file your documents, such as an attorney who practices in your state.
Finally, we recommend dealing with someone you like and trust. Working with someone you trust and like shouldn’t be a problem when it comes to giving them any information that would help you get the best price possible for your owner financed mortgage note. We encourage everyone to thoroughly vet us, American Equity Funding, through the Better Business Bureau and other trusted sources. We have many satisfied customers we can refer you to as well. We hope this helps you understand why it is best to give all the information to the note buyer before receiving a quote. If we have limited info, we will have to act conservatively to cover the risk of the unknown.