Some Options Available to a Note Holder

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The following is an example of some different options available to a note holder.  Your note's value may be higher or lower depending upon property type, terms and payor information.  Every note, property and payor is unique and is evaluated to give you the highest possible price and best possible options available to you for your situation.

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           Example of a $100,000.00 note of where a Seller is 
                                    receiving payments



          Sale Price = $120,000.00

          Down Payment = $20,000.00

          Seller Financed (note) $100,000.00

          Interest rate  - 8%

          15 year term (180 payments)

          No balloon amount

          Monthly payment = $955.65

          36 payments have been made the current balance owed                 is   $88,285.62
 


  Some of the options available to the note holder


1.  Do nothing.  Continue receiving the remaining 144 monthly payments of $955.65  


                                                 

2.  Full Sale.  Sell the entire note now.                                    

NOTE HOLDER receives: $77,933.46 CASH NOW! 
    

When entire note is sold, it is always sold at a "discount" off the current principal balance of the note.  The reason for this is that the face interest rate of the note is seldom as high as the market yield required in a secondary mortgage market.  The discount could more or less, depending on the current yield requirements in the current secondary mortgage money market.





3.  Partial Sale - Front end payments.  Sell the next 5 years (or     any number you want) of payments (60 payments in this example).Then receive the last 84 payments back.               

NOTE HOLDER receives: $40,503.11 CASH NOW!

plus $61,313.80 loan balance in 5 years! 
                 

Partial sales are very attractive from the point of view of the note holder because the note holder does not have to take a big discount.  The main reason for a discount to be large is that payments due in the distant future are worth much less in today's dollars than the payments that are due soon. 

In a full sale, the note holder is selling all the payments and not getting much for the ones at the end of the 15 year term - thus the large discount.  In a partial sale, where the front end or near term payments are sold, most of the payment is interest.  This means that the note holder gets a sizeable amount of cash now.  And when the note holder gets the note back, the balance of the note is still fairly high.

A partial sale of the front end payments is like "having your cake and eating it too".  You get a sizeable chunk of cash now and when you get the note back, it has a higher remaining principal balance and lots of payments left to collect.





4.  Full Sale - Split Funding.  Sell one half of the note (the next 72  payments) now and the other half of the note (the remaining 72 payments) after the first 72 payments are paid.

NOTE HOLDER receives $47,584.71 CASH NOW!

plus $47,584.71 cash in 72 months!  
                      

In the split funded sale, the note holder is selling all the payments, but is only selling part of the payments now and part of the payments in the future.  This type of sale is really a hybrid between a full sale and a partial sale.                                                                              

This is only one variation of the split funded sale.  The note could be split into 3, 4 or more equal or unequal parts.  



                           

5.  Partial Sale - One half of each monthly payment.               
Sell one half of each monthly payment and continue to receive the other half.                                                                               

NOTE HOLDER receives $35,983.16 CASH NOW!

plus $477.82 per month for 144 months!  
               

In this type of sale, the note holder sells off half of each monthly payment and continues to receive the other half.  This is a particularly attractive way to sell a note, if you need some cash now, but also want to keep part of the monthly cash flow. 

                                    

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Again, these are just some of the variations and options available to a note holder when considering the sale of all or part of their Real Estate Secured Note.  M&M Funding can tailor a transaction to meet the needs of the note holder.