Private Mortgage Note

Private mortgage notes occur when the owner of property sells to someone else and carries the note himself rather than going through a third party such as a mortgage company or a bank. If a property owner decides to handle the sale of his property this way, he does face some risks. If the buyer is late with a payment, or skips altogether, it is the owner's responsibility to pursue the matter through correspondence, telephone, or legal action. When the contract is faithfully met with a private mortgage note, and the title is finally transferred, of course, his goal of getting rid of property he no longer wants is met, and at a reasonable profit.

There are times when the holder of a private mortgage note decides he would rather not carry the note for its full term. The reasons for this could be anything from the inconvenience of the IRS reporting or the failure of the buyer to pay the property taxes, to the death or divorce of the buyer. In that event, there are companies that specialize in the purchase of private mortgage notes in whole or in part. Those companies who make such offers on the Internet will usually buy the notes at a discounted price, although there is at least one who advertises it will buy private mortgage notes at 102%. Even with the discount, it means the property owner can receive a lump-sum cash payment that he can use however he wishes. All the expenses of the transfer are born by the purchaser of the note. In addition, companies who purchase them do not limit themselves to a particular kind of property involved. They will buy loans for single or multiple family residences, unimproved or improved real estate, condominiums, apartment buildings, and commercial properties.

Owners do have another if they need immediate cash but do not want to relinquish the ownership of the property at this time. Some purchasers of private mortgage notes will buy a set number of payments, such as 24-36 monthly payments on the property. The company gives the owner cash for that number of payments, the buyer pays the company for that long, and at the end of that payment period the title reverts to the owner. This is helpful in the case of family emergencies, college tuition payments, or any of the other financial problems the owner of a private mortgage note can face. The final transaction under these circumstances is a simple transfer of title from one person to another, which was the idea to begin with. "And as ye would that men should do to you, do ye also to them likewise," (Luke 6:31).

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