How to increase your mortgage note value

So you are the proud owner of a mortgage note. Good for you. you also think that you might want to sell this in the future to get a lump sum instead of the monthly payments. But how can you increase your mortgage note value? Here are some tips:

Enhance value through proving payment history!

Maintaining precise records of mortgage note payments is vital to determine the buyer’s outstanding balance and gain insight into their payment patterns. Furthermore, this process offers an additional advantage of establishing an official payment history. When there is an official payment history and it is well kept and easy to present to potential buyer, you can increase note value significantly

Enhance the perceived worth of a note by showcasing prospective buyers a tangible history of timely payments.

To monitor payments on seller-financed mortgage notes, there are primarily two avenues: 

1. Utilizing an outside servicing company 
2. Handling payment tracking directly through the seller.

Service the note with a professional servicer

One straightforward option is to entrust the task to an expert. Payments are routed to a third-party service provider (called servicer), who monitors the outstanding amount and sends the funds to the recipient. This provider also sends out the yearly 1098 Mortgage Interest Statements and can securely store the relevant papers.

Professional service companies are knowledgeable in the legal regulations pertaining to the collection of payments and can provide valuable assistance in the event of payment default or tardiness.

When you service your note with a professional servicer you ensure that everything is done right and by that increase your mortgage note value!

If you decide to service the note yourself

When a seller goes for the “Do-It-Yourself” approach instead of hiring a third-party expert, they must adhere to the following steps:

1. Secure the original note and accompanying documents in a safe deposit box.
2. To ensure a transparent payment trail and avoid potential discrepancies, it is advisable to make copies of any checks or money orders received. Subsequently, it is not recommended to accept cash payments since it can be challenging to verify the payment history without official documentation.
3. To ensure accurate record-keeping and financial management, make sure to deposit each payment separately and retain a copy of the bank record for future reference. Avoid combining multiple checks to streamline the process and maintain financial clarity.
4. Initiate a ledger or spreadsheet outlining all received payments, with precise dates and amounts meticulously recorded.
5. Determine the allocation of funds towards interest, late fees (if applicable), principal and the residual principal balance by utilizing an amortization schedule or financial calculator. After completion of this calculation, log the results in the ledger to maintain accurate financial records.
6. Ensure compliance and transparency by sending an annual statement, including the IRS1098 Mortgage Interest Statement, to the buyer or payer. This practice guarantees that all parties are fully informed and up-to-date on their financial obligations, setting clear expectations and fostering a healthy business relationship.
7. To ensure timely payment of real estate taxes and property insurance, it is recommended to establish a tax and insurance escrow account where buyers can make monthly deposits of 1/12th of the annual payment. This will help keep the accounts current and avoid any unwanted surprises.
8. The eighth task is to dispatch collection letters as and when required for overdue payments, expired insurance policies, or outstanding property taxes.

So why note buyers want to see payment history?

Investors who agree to purchase a note typically request a payment history. The value of a note is enhanced through a verifiable payment history, which provides evidence of timely payments. A payment history is deemed validated when it is obtained from a third-party or supported by the aforementioned documents and records. Our recommendation is to use a third party company to enhance the mortgage note value

Regrettably, some note holders neglect to monitor the payments received, resulting in memory recall when selling the note, contract or trust deed. This poses a challenge to the purchaser, as no evidence of payment has been provided. Although a payment history affidavit may be presented as a substitute, it fails to provide the value of being verifiably proven.

Increase your mortgage note’s value by establishing a payment tracking system today. This proactive measure will safeguard your financial interests.