Advantages and Disadvantages of Selling a Mortgage Note vs. Holding the Note

In today’s volatile economy, many note holders are seriously considering whether or not to sell their private mortgage. So what are the advantages and disadvantages? Let’s start with the disadvantages.

Disadvantages of selling a private mortgage:

1. First and most obvious, once you sell your note, your monthly income is gone forever.
2. If you made a significant gain on the sale of the house you have distributed during the life of the note, you may be required to show any remaining gain once 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. You 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 relieve anxiety.
3. You no longer risk defaulting on your mortgage note and the inconvenience of having to foreclose.
4. You no longer have to worry about whether the debtor has paid their property taxes or kept the home.
5. You do not have to keep monitoring the tax office to see if the mortgagor has new liens on the property from a second mortgage or federal or state taxes, etc.
6. Finally, it is no longer necessary to keep a detailed record of the mortgagor’s payment history or report interest payments to the tax authorities.

Well there you have it, the pros and cons of selling a mortgage note. Good luck with your decision.