Why Are Mortgage Notes Discounted Anyway?

Written by Frederick B Webb Jr.

When real estate note brokers purchase partially paid notes, they payrepparttar note holder a discounted price after factoring inrepparttar 148619 time value of money,repparttar 148620 payer history, and property condition.

If  there is still a significant period of time left forrepparttar 148621 payer to make payments,repparttar 148622 future payments are not worthrepparttar 148623 same amount in current dollars.

Calculations are made to equate allrepparttar 148624 payments into current value, which is howrepparttar 148625 discount is determined.

After purchasing notes at a discounted price, note brokers try to restructurerepparttar 148626 loan and increase its value.

Increasingrepparttar 148627 value ofrepparttar 148628 loan requiresrepparttar 148629 payer to refinance or increase payments, which requires a new contract.

Factoringrepparttar 148630 same concept of time value of money, we can understand how increasing payments now creates more value. The note can then be sold for a higher price.

Discounts must be taken fromrepparttar 148631 loan amount due to inflation andrepparttar 148632 time value of money.

There may still be years left onrepparttar 148633 loan repayment, butrepparttar 148634 payments far inrepparttar 148635 future are not worthrepparttar 148636 same amount in dollars today.

Calculations are made using special formulas to equaterepparttar 148637 future payment amounts into today's prices, making today's price discounted significantly.

Onrepparttar 148638 other side ofrepparttar 148639 coin, notes that are well seasoned can fetch near remaining balance face value.

***Additional Major Reason Notes Are Discounted***

Although I am a broker myself, I put this site here because I want to bring you a clear understanding (from an insider's perspective) ofrepparttar 148640 nuts and bolts mechanics of howrepparttar 148641 secondary market mortgage note industry works.

A major reason many people are turned off from selling their real estate notes is because ofrepparttar 148642 discount factor......

but what you probably don't understand is that when you use a broker, like myself or any other broker anywhere, you pay additional fees that further drive downrepparttar 148643 amount of money you walk away fromrepparttar 148644 table with.

Should You Accept A Full Purchase Offer For Your Note or Not?

Written by Frederick B Webb Jr.

Should You Accept a Full Purchase Offer or Not? ======================================= You could be facing a dilemma when considering payout options on selling your mortgage note!

 To accept a full purchase offer or a partial purchase offer is not always an easy decision.

Sure, to takerepparttar full purchase option is an easy decision to make if you're holding a second position note on a property that doesn't have any equity after you addrepparttar 148618 first and second mortgages, but what if that's not your situation?

 Full purchase payouts can be good if your primary concern is to just get out ofrepparttar 148619 note and be done with it.

But if getting top dollar for your note is your main concern, a full purchase sale may not berepparttar 148620 thing to do.   Before I get too far into this, perhaps you,repparttar 148621 reader, would be better served by a brief revisiting ofrepparttar 148622 different payout options and what they entail. Agreed?

 The 5 most common ways note purchase transactions are structured:

1. Full Purchase. This is when a note investor buysrepparttar 148623 entire note. The note seller is no longer responsible for collecting payments and is 100% free of ownership of and responsibility forrepparttar 148624 note.

 2. Straight Partial. Here, a note investor purchases a predetermined number of payments in order to meetrepparttar 148625 seller's cash requirements. Afterrepparttar 148626 last ofrepparttar 148627 predetermined payments,repparttar 148628 balance onrepparttar 148629 note reverts back torepparttar 148630 seller.

 3. Reverse Partial. The seller, in this scenario, gets a lump sum and continues to receiverepparttar 148631 full payment amount for a specified and agreed upon period of time.

This kind of arrangement is most fitting whenrepparttar 148632 seller needs a large amount of cash atrepparttar 148633 closing but still wants to receiverepparttar 148634 monthly payments for a while.

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