1. The discount is only applied to the portion that you sell. Since cash today is worth more than cash tomorrow, all note sellers can expect a discount to be applied to their remaining note balance when selling. By selling only part of your note, less of your remaining note balance is used to pay the discount.
2. You have payments left that can be sold in the future. Let’s say you need $10,000 cash today and you have a note with a remaining balance of $50,000. You can sell part of the remaining balance today in order to get the $10,000 cash that you need. After selling part of your note, you will retain the rest of the balance. Should you need cash again in the future, you can sell all or part of the backend payment.
3. It puts the most cash in your pocket in the long run. Aside from not selling your mortgage note, a partial note sell is the way to go to get more cash in your pocket. The discount on your note will vary depending on several factors including the remaining term. A longer remaining term may be subject to a greater discount. A partial note sale will discount a smaller portion of the remaining term and allow you to continue collecting monthly payments with interest on the rest.
4. You maintain a level of control. Since you are still part owner of the note, you do have control in certain situations. For example, if the note goes into default, you have the right to buy back full ownership of the note. This will allow you to either foreclose or resolve the default and bring the note back to good standing.
5. The management hassle is eliminated. Even with a partial note sale, the broker will take over managing the note. Monthly payments, calculating reserves, financial reporting, and much more are no longer your responsibility for the life of the note.
