The Mortgage Report

Selling a mortgage you own

Every now and then I have someone call me wanting to know if I buy mortgages. I don't, but usually it's only because I don't have the money.

Lots of people own mortgages, usually obtained when they sold a property and agreed to finance part, or all, of the purchase price. What a lot of people don't realize is they can sell that mortgage to any willing buyer at any time. When you own a mortgage, what you basically have is a bond secured by real estate. It pays a certain interest rate along with a return of your principal every month. For example if you took back a second mortgage when you sold a house five years ago, say for $25,000 at 8 percent interest for 15 years, you receive a monthly payment 238.91, and you are currently still owed 19,691. You could sell the mortgage to someone who had the money to invest if you decided you would rather have a lump sum than continue to receive the monthly payments.

The question is what could you sell it for.

Most investors buying a second mortgage on a property they are unfamiliar with wouldn't be interested in a rate as low as 8 percent, so they don't pay it. The interest rate is stated in the note and can't be changed, so the investor offers you less than the principal balance for the mortgage in order to increase the rate he is receiving on his investment. You may be offered, say, $15,000 for the mortgage, which makes the investors yield closer to 15 percent. After some relatively minor red tape at the courthouse, you have the money and he has the mortgage.

If you decide to sell, or for that matter buy, a mortgage loan, you definitely want to consult someone who is familiar with mortgages. It would also be a good idea to become familiar with a financial calculator.

Carl Trawick is a Mortgage Specialist and Licensed Mortgage Broker with the firm Access e*Mortgage. He can be reached at 904-343-1145 or ctrawick@nefcom.net