Mortgage Notes and Why People Prefer Private Over Traditional

Mortgage Notes and Why People Prefer Private Over Traditional

People might be familiar with the concept of mortgage, but there are still many that aren’t as familiar with the concept of a selling a note. Of course, a mortgage note is different from your typical, standard mortgage, but in what way? In this article we will tackle the subject of mortgage notes and see what they’re all about and why people appeal to them over traditional mortgages in increasingly more cases lately.

What is a mortgage note?

A loan that has been used for the intention of purchasing real estate can be repaid. The document that holds as evidence of the necessity of that repayment is called a mortgage note. In other words, it is a note that contains all the details about the repayment of a real estate purchase loan.

This is an alternative to traditional mortgaging where a bank is usually involved. This is called private mortgaging and involves sending out payments as part of the repayment of the loan to a private individual or entity. There are other implications that come with a private mortgage, such as the fact that the aforementioned private party has the option of selling the note. Selling it for a lump sum is one of the options, while the other is to keep the note and continue to get paid as per the note agreement.

The purpose of a mortgage note

As evidenced above, a mortgage note is the private version of a traditional bank mortgage, in the sense that it marks the agreement not between a person and a bank but between a person and private entity. When it comes to repaying a loan, a private mortgage can be used to serve as a lien. The property featured on the mortgage note will serve as collateral for said repayment.

Why people choose private mortgage notes over traditional bank mortgages

The way most people are familiar with when it comes to obtaining a mortgage can be inaccessible to many people. There are many reasons for which a bank will deny someone a mortgage. These reasons range from not having a good enough credit score to just not meeting the requirements that the bank has when it comes to lending out mortgages.

These issues can be swept under the rug with the help of a private mortgage where a mortgage note helps those in need of a loan get one from a private entity. Another reason for which a private mortgage might be better fitted for a situation is if it is a family matter where the process of giving and receiving a loan with real estate involved happens between relatives. A private mortgage might be way better in this case because it offers the possibility of keeping the involved assets in the family.