How Much Is Your Seller Financed Mortgage Worth?
You may be able to collect 65% to 85% and sometimes higher on your note depending on the length of term, pay-out due and based on the buyer's credit.
Many do not buy Seconds, Wraps or Flips.
How much is your seller financed mortgage worth? It all depends on several factors:
- The interest rate on your mortgage
- Whether it is current or not
- If it is a first or second mortgage
- The size of the mortgage to the value of the property (Loan to Value)
- The credit report of the borrower
- How many payments you have received (Is the mortgage "aged")
- The type of property
Value Increased
Equity position of 20% or more
1-10 year maturities, or longer term amortization with balloon
Good borrower credit
Seasoned note with satisfactory payment history
Market interest rate for risk involved Late charge provision in note
Due on sale/right to approve assumptor clause
Financial statement on borrower
First mortgage or large second mortgage relative to first
Step rates which increase interest rate over time (not usual)
Timber cutting clause on acreage properties
Flood insurance required and maintained if property is in flood zone
Professional note collection by third party
Cross default clause in junior liens (default on first mortgage is grounds to default the second, even if current)
Credit report on borrower available and up to date
Reasonable sized mortgage compared to the property value
Well written and structured note and Deed Release provisions
Title insurance available and no exclusions
Value Decreased
Limited equity/Small down payments
Long term fully amortizing obligations (no balloons)
Bad borrower credit
Unseasoned note or simultaneous closing
Below Market interest rate for risk involved
No late charge provision on the note
No due on sale or assumption/Approval right
No Financial statement on borrower
Large amount of debt senior to subject debt (on junior liens only)
Fixed rate note
No timber cutting clause on acreage properties
Property in a flood zone without flood insurance
Seller collects own payments
No cross default clause in junior liens (default on first mortgage can mean second is wiped out and holder of second has no right to default the second, if it is current)
No credit report on borrower and no right to pull one
Small size note or contract
Badly written note
No title insurance
Subordination clause that could force the note into lower priority
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