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Why Would I Sell My Mortgage Note For Less Than The Balance?

When you sell your mortgage note, you will most likely be accepting an amount that is less than the unpaid balance.  This leaves many people wondering how that can be beneficial.  Well, the simple answer is the earning power of the decreasing mortgage balance is considerably lower than the earning power of a fixed sum investment with interest.

Let’s look at an example to highlight this scenario:

The current balance of the mortgage you own is $50,000 with a 6% interest rate.  This means you have 10 years of payments left at $555.10 per month.  When those 10 years have elapsed, you will have received a total of $66,612.00.

Now let’s say you were to sell your mortgage note for $43,000.  Then invest that same amount in the stock market, a mutual fund or some other investment vehicle which also offers a 6.00% return.  After ten years the interest earned would total $35,234.  In this scenario, including the original $43,000 principal investment and the interest earned, you will have received a total of $70,234.  That’s a $3,622 (5.2%) increase, in earned income, for your benefit. 

If you are interested in the possibly of selling your mortgage note, give the professionals at Investors Financial a call.  We will analyze your current situation and give you a free no obligation quote for a cash purchase of your mortgage note.