Frequently Asked Questions about Selling a Mortgage Note

ACT TODAY BEFORE DECLINING REAL ESTATE VALUES AND NEW INTEREST RATES DEPRECIATE YOUR INVESTMENT!

Why should I sell my mortgage note?

Usually, a promissory note is acquired in lieu of the cash desired during a real estate transaction. If retained long enough, many notes will eventually pay off. However, late payments, insurance liabilities, tax problems and foreclosure may soon plague some mortgage note holders. Even when these problems do not arise, many people would really prefer to have their cash now!

What other reasons are common?

Other reasons include: to pay off high-interest debts, to invest in a business, real estate or stocks, to pay tuition, to remodel a home, to buy a new car or boat, to settle an estate or to provide for relatives unable to service the mortgage. Some people didn't want to carry back the note in the first place, or have grown tired of collecting the monthly payments.

Will I incur any "out-of-pocket" expenses?

Costs associated with this transaction if any will be disclosed at the time of the quote. Normally no costs are associated with it.

When I convert my note to cash, how will it affect the person(s) paying me?

It will not. All the terms and conditions set forth in the original note and mortgage remain in force. The only change will be to whom and where future payments are sent.

How long will it take to receive my money?

Generally, from three to six weeks. Payment is made at closing, when all documents have been signed and recorded.

Will I need to attend the closing?

Not necessarily. Our office can close the transaction by sending you a closing package along with easy to follow instructions.

How will I be paid?

Your payment will be made by certified check from a major financial institution or title company.

Will you buy second or third mortgages?

Yes. The position of the mortgage is not as important as the "loan-to-value" (LTV) ratio. A second or third should be at least 25% the size of the first. If the LTV is right, we'll buy it.

My mortgage has a balloon payment at the end of the term. Is that OK?

Yes, we can buy your mortgage with a balloon at the end of the term.

Will you buy a new mortgage, or does my note need to be "seasoned"?

Definitely! We buy balloons, too.

Do you buy interest-only mortgage notes?

Yes!

Will you buy a new mortgage, or does my note need to be "seasoned"?

Yes, we buy new or recently created mortgages and trust deeds. (A seasoned mortgage is one that has been partially paid down, giving a history of how payments have been made.)

Do you buy notes from any state?

Yes! And Canada too.

Can I sell a portion of my mortgage note?

Yes. In some cases, you may require only a specific amount of cash to make a purchase, handle an emergency, pay off a loan, etc. If you had 200 payments remaining, you could, for example, sell just the next 60 payments for the amount needed. After five years, the payments would revert back to you.

Do you limit the size of the notes you buy?

No. Any size is OK if the Loan to Value is favorable.

Let's say that I'm holding a mortgage with a balance of $25,000. Will you pay me the entire $25,000?

The value of money decreases over time: a $100 bill will buy less in ten years than it would today. Because of this, the amount paid will be less than the current balance. The amount depends on the interest rate you charged the buyer, the term of the mortgage, the current prime rate, the value of the property, as well as other factors.

Why should I sell my mortgage note for less than the balance?

Simple: The earning power of the decreasing mortgage balance is considerably lower than the earning power of a fixed sum invested at interest. For example, assume that the current balance of the mortgage you are receiving payments on is $25,000, at a 10% interest rate, with ten years of $330.38 monthly payments remaining. The total value to you if you were to receive all ten years of future payments is $39,645.60 (120 months times $330.38). However, if you accepted $22,000 today, and invested that amount in a 9% government bond (or other insured investment), the "simple" interest earned would be $165 per month. Ten years of interest would bring you $19,800, without touching your original $22,000 principal. Adding those up, the total value of your investment would be $41,800, which exceeds the $39,645.60 you would have collected from the monthly payments! Furthermore, if you sell, you have a guaranteed income when you invest in insured, fixed rate investments. A mortgage note is only a promise of future payments that may, or may not, appear.

[P.S. When a note is paid off, there's no more income. If, however, you exercise the cash now option, your principal and interest could remain with you forever!]

What can I expect when I call First Capital Funding Corporation?

We treat every client with the respect and fairness that we expect to receive ourselves. We ensure that all your questions, worries and concerns are addressed and that you are comfortable with the transaction.

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