Holding a Mortgage Note? There Are at Least 5 Things to Think About

If you've sold real estate and are holding the mortgage your self, you've created a cash flow for yourself which may be a great thing. On the other hand, you also have responsibilities, more than 15 that I know of. Here are the first 5:

1. You must abide by the rules and report in accordance with the Compliance with Fair Credit Reporting Act (FCRA)
2. You must be in compliance with the Truth in Lending Law.
3. You have to collect the monthly mortgage payments yourself and maintain records of the principal and interest breakdowns (or pay someone to do it for you)
4. There is the risk of default or bankruptcy on the part of the buyer; an even greater possibility during this time of economic crisis.
5. Potentials of destruction of your property either by the buyer, through vandalism, fire, weather related occurrences, etc.

And there are several other things that you are probably aware of in addition to the above (I can think of at least 10).

So what options do you have? If you need the income from the mortgage note, then keep it and make sure you are aware of all the things mentioned above and stay on top of your investment. Remember, until the buyer pays off the note in full, YOU still are the owner and that property is an investment.

On the other hand, if you can live without the monthly income, at least for a few years, and you could use some cash for something else, you could consider selling a portion of the note. Actually, you don't sell "part" of the note; you sell the monthly income for a pre-determined number of months.

Take a hypothetical example: You have a $300,000 note on which you receive $1,500.00 in monthly payments. You would like $50,000 to invest in something, or to meet some unexpected medical payments, or help a child pay off college debts. You could contract with an investor who might agree to give you the $50K in exchange for the right to say, 38 monthly payments (hypothetical!).

You receive the $50,000 immediately after the contract is signed and when the 38 months is over, the monthly payments revert back to you. In a market where the value of the house is rising, you might end up making way more than you expected in the long run plus you've had the use of some of your equity WITHOUT borrowing against it.

You can request a free, confidential, no-obligation quote here:

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