In today’s volatile economy, many note holders are seriously evaluating whether or not to sell their private mortgage. So what are the advantages and disadvantages? Let’s start with the downsides.
Disadvantages of selling a private mortgage:
1. First and foremost, once you sell your note, your monthly income is gone forever.
2. If you made a significant profit on the sale of the house you distributed during the life of the note, you may need to show all of the remaining profit after the note is sold. (Consult your tax advisor).
3. You will get a discount on the remaining balance of the note due to the time value of money.
Advantages of selling a private mortgage:
1. Receive a significant lump sum of cash, usually very quickly.
2. You can use this cash for lucrative business opportunities or simply as a cushion for these tough economic times to ease anxiety.
3. You no longer risk a mortgage note default and the hassles of foreclosing.
4. You no longer have to worry about whether the mortgagor has paid their property taxes or kept the home.
5. You don’t have to keep monitoring the tax office to see if the mortgagor has new ties to second mortgage ownership or federal or state taxes, and so on.
6. Finally, you no longer need to keep detailed records of the mortgage debtor’s payment history or report interest payments to tax authorities.
Well there you have it, the pros and cons of selling a mortgage note. Good luck with your decision.