Re: How do I divide early payoff of RE Note when a partial has been sold? - Posted by SCook85
Posted by SCook85 on January 25, 2000 at 05:55:15:
In a case such as this one it is usually the purchaser of the partial who determines what they should get and what is left for you. But you should know the way that it works to make sure you get what is due to you.
The purchaser of the partial bought 119 payments at a predetermied amount. They usually develop an ammortization schedule showing 119 payments of $xxx, and the payoff after each payment is made. The payoff being what is owed to them so that they will achieve the desired yield of when they purchased your note.
You need to keep in mind that the payments due to you are still future payments which are worth significantly less then payments today. I’ll give you a very quick example that I was involved in.
A $51,900 note at $10.5% interest, payments of $474.75 for 360 months. Note buyer buys 156 payments for $38,500. That left 204 payments for me.
If the payor of the mortgage were to refinance the entire $51,900 within the next 30 days the company who purchased the 156 payments from me would have received $38,500 + $2,000 (sort of a prepayment penalty). I would have received the other $11,400.
The point that I am trying to make is that the first 156 payments were worth $40,500, and my 204 future payments are only worth $11,400 (best case scenario, I would have a difficult time selling them for that).
I hope this helps!