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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