Why sell promissory note?
If you own mortgages (meaning that you’re a mortgage lender and someone pays that debt to you), you may be interested to learn what it means to sell notes and mortgages. You might also like to discover how this benefits the person or company that owns those mortgages and the advantages to selling. It’s good to know this up front because in order to sell notes successfully, you’ll need to understand everything legally involved, and you’ll also need to be aware of how your business and your finances will be affected. Since everyone’s situation is different, you must weigh the pros and cons of the choice.
When you sell a note, you’ll take a small hit in exchange for the sale, but there are still many advantages for doing so.
The one paying the mortgage no longer owes you, but they will owe the party that bought the mortgage loan. You’ll get a lump sum of cash right now in exchange for monthly mortgage payments. It’s important to know that when you sell notes you don’t receive cash for the entire value of the loan. This is because the person buying it from you must make a profit for themselves, as well. Consider this when deciding if it’s a good arrangement. While you will receive less than the value of the loan, there are other financial advantages to be realized. An obvious benefit is having cash in hand, and no longer having to be concerned with a possible default on the loan, which is very common today. Having this amount of liquidity may allow you to invest in other ventures that you deem more profitable than the mortgage itself.
In a perfect world, the profit you receive from other arrangements that opened up to you after having sold a note will outpace the profits you would have received had you kept the mortgage on your books. You’ll have to do your own math here. However, there may well be other advantages to selling, and these may not always be financial.
For instance, you might now be able to meet obligations such as medical or college expenses. You may be able to put yourself into a position where you can help a close friend. You may simply want to retire. When you sell a note, not only will you have a substantial amount of disposable income on hand, but you’ll also be able to walk away from the hassles of maintaining the debt including the accounting.
Learning everything involved will help you to decide if selling notes is the right decision for you. Be sure to speak with a good lawyer or financial advisor before you embark on this course of action so that you won’t get caught up in a bad decision.