There are all sorts of ways to buy and sell a mortgage note.
One of the most common questions that note sellers asks is how a “partial” works. A partial is simply when a mortgage note buyer like ourselves offers to buy part of a note. So Instead of purchasing the entire note, we purchase just some of the payments or the payments and part of the balloon.
It’s that simple!
Here’s an example of a partial note deal:
What is you sold a house for $200,000 2 years ago and now find yourself needing money to help your aging parents. You are offered $160,000 for your entire note which if for 30 years amortized. Knowing that you have a great note with a great purchaser who pays on time, has good credit and has seasoned this note already for 2 years, you realize you only need $40,000 right now and still want to keep your investment for the future.
What you can do is sell the next six years of payments to the note buyer to get the $40,000. As the note holder, you solve both your problems, you get the cash flow that you needed to help your parents and you get to keep most of the note and take a smaller discount than if you had sold the entire note. I you want, you can sell the additional payments at a later time.
The drawback for the note holder is that he becomes 2nd position lien holder so a little less protected if the purchaser defaults on the note, however, with us as the note buyer and our reputation on the line, we would make sure that the original note holder and ourselves are both covered should we have to foreclose on the property. So we all win.