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Home Financing Options For All Credit Types!The Very Best Mortgage Programs For All Borrowers. All Situations Considered!"Closing Loans That Others Promised" - Since 1993
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Understanding The Term "Discounting A Mortgage"You may have heard the old saying "a dollar today is worth more than a dollar ten years from now." Maybe you haven't. Even so, it's hard to guess how much your mortgage is worth without knowing all of the details. Take Advantage Of The Most Aggressive Pricing Structure In The Industry! We Pay As Much As * 96¢ On The Dollar!Don't be fooled by games and gimmicks! If you have a need to sell your mortgage and you want to get the absolute best price available then, you owe it to yourself to give us an opportunity to provide you with a price quote. "Pricing" a mortgage involves a time value of money calculation which determines the "present value" of the mortgage. The result of this financial calculation is the value of the mortgage in today's dollar. The difference between the remaining principle balance and what someone will pay to buy the mortgage is known as the "discount". Some Factors That Effect The "Discount:"
I Have 120 Payments Remaining @ $500 Per Month. My Mortgage Is Worth $60,000 Right?Unfortunately, that's incorrect. It is important to know that the pricing of the mortgage is calculated on the remaining principle balance and not the number of remaining payments multiplied by the payment amount. Remember that the payment amount includes both, principle and interest assuming that it will take a designated number of years to pay the mortgage in full as dictated by the terms of the note. It is important to know that interest only accrues in arrears which means as long as there is a balance outstanding. So, if the payor was to pay the mortgage in full tomorrow, you would only be entitled to receive the current balance due and not the future interest. The same would hold true for someone who bought your mortgage. I Saw An Advertisement Where Someone Said They Will Pay Me 100% Of The Remaining Principle Balance.Regardless of what you may have read or heard, NOBODY that buys mortgages will pay you 100% of the remaining balance due. There is always a discount. The advertisement simply refers to a method of deception that some companies use to "juggle" the numbers to make you think that you are getting 100% of the balance. Even so, that program requires you to get some of the money now and to receive the remainder in payments, years down the road. (Isn't that what you are doing now?) Why Won't You Pay Me $40,000 For My $40,000 Mortgage?To demonstrate the point that there MUST always be some discount, assume that we bought your mortgage with a $40,000 remaining principle balance. In this scenario, we were very generous and paid your "asking price" of $40,000. Three days later the payor goes to his bank for a home equity loan to consolidate his debts. While at the bank he realizes that if he refinances his mortgage and his credit card debts, not only will he have just one payment each month but the interest rate will be substantially lower too. This is because his new loan will be a first mortgage instead of a much riskier second mortgage. Two days later, we get a payoff request from a title company. What is the payoff? The current balance of $40,000 plus a few days worth of interest. What's Wrong With An Early Payoff?As the buyer in the above scenario, we have actually lost money on the transaction. How? Well, because in order for to protect our investment, we spent several hundred if not several thousand dollars performing "due diligence" such as title insurance, appraisal fees, etc. And, we paid the closing costs to acquire the mortgage. These costs would have included settlement and recording fees, etc. As you can see in this example, one could not "afford" to buy a mortgage if it were not for the discount. Risk Also Determines The DiscountYes, it is true that the property serves as security and is the collateral for the repayment of the debt. However, in the event of a default by the payor, foreclosure is a very expensive and time consuming option. The foreclosure process, even if started immediately can cost $5-7000 and take up to 120 days to complete. So, in addition to the legal fees, we have not received any payments for six months as well. What is the likelihood that someone will payoff the mortgage right away or default on the mortgage altogether? It's hard to say. Has it happened before? Yes. Will it happen again? Absolutely. You Owe It To Yourself ... Get Your Free, No Obligation QuoteObviously, we have not elaborated on all of the factors relating to the "discount." However, the purpose of this information and the most important matter at hand is that you are aware that a discount exists. No one can tell you for sure how much they would pay for your mortgage until they know the exact details relating to your transaction. So, if you have a need to sell your mortgage and you want to get the best price available then, you owe it to yourself to give us an opportunity to provide you with a price quote. * Subject to restrictions. Call for details. Request Additional Information Here |
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