If you’re reading this, then that likely means you’re considering selling your mortgage note for any number of reasons.
If you are like a lot of people, you may be tired of collecting monthly payments over time and would prefer a lump sum of cash…today.
Unfortunately, many mortgage note sellers receive low offers from investors. Leaving them (and you) stuck between a rock and a hard place.
Why the low offers?
Because, oftentimes, the note holder didn’t think to structure the note the right way from the start.
With that said, let’s explore a few ways you can increase the cash value of your mortgage note and plan your next payout.
How to Increase the Value of Your Mortgage Note
Only Work With Borrowers That Have Good Credit
To ensure a high cash value for your mortgage loan from the start of financing, it’s essential to work with borrowers that have a favorable credit score.
Why?
That’s because most mortgage note investors base their offers on the borrower’s credit score.
The investor wants to make sure that they’ll receive a fair return on their investment, which will only happen if the borrower makes every payment. So, credit is an essential factor in this type of transaction.
Therefore, strive to only lend to people who possess a decent credit score.
Improve the Borrower’s Credit Score
If you already have a mortgage note and your borrower’s credit is less than ideal, you can still increase its value before a sale. To do this, you’ll need to work with the payor to improve their credit score.
Finance isn’t always as black and white as it may seem.
People with low credit scores are sometimes trustworthy and will make on-time payments.
In this case, place your note with a loan servicing company that will report the borrower’s monthly payments straight to a credit agency (Experian, Equifax, etc.).
If the borrower is making on-time payments, their credit score will gradually improve, and so will the cash value of your mortgage note.
As a general rule of thumb, make sure to wait at least a year to sell your note so you can see how your borrower’s credit has improved.
Create a Shorter Loan
Many note buyers prefer loans with shorter terms that run 10-20 years.
While they will purchase 30 (and even 40 year loans), the time value of money can impact the pricing.
You can be proactive by creating a shorter loan term before you agree to finance to a borrower. This will make your mortgage note more attractive to investors who want to maximize their earnings without having to wait for several decades to be paid off.
Just be sure any payments are affordable to the buyer and are within their ability to repay based on their income.
What Next?
Increasing the cash value of your mortgage note is best done during the beginning stages of the financing period. However, if you already have a note in progress, you can still augment its value for a potential sale down the road.
If you’re ready to sell your mortgage note, click here to receive a free quote.