A Partial Purchase Note Buyer Option allows the note seller/note holder of an existing cash flow instrument (seller carry-back mortgage, land contract, structured settlement, etc) to sell a portion of the rights to collect future payments to a note buyer for a lump sum of cash.
This means that the seller can avoid the steeper discount associated with a full purchase buy-outs on the secondary mortgage market.
This occurs by assigning a portion of your remaining payments for a smaller lump sum amount, ensuring you future income down the road of life’s twists and turns.
It always a safer bet…
For example: Let’s say you have a seller financed mortgage note with a total owed balance of $121,200 at 7% interest payable in monthly installments of $1,162.95 with 210 months or 17.5 years remaining. If the seller where to sell 210 monthly payments of $1,162.95, this would be considered a full purchase buy-out.
But, if the seller/holder only sells 72 payments at $1,162.95 to a note buyer, that would be considered a straight partial purchase. This means on the 73rd payment, that loan would revert back to the original seller/holder who could either hold the rest of the payments to maturity or assign some more payments to a note buyer for cash. This option always gives the seller more money over the long run. This is due to the sharing of the risk factors between the seller and the note buyer.
Posted in: Pay Out Options