# How do I divide early payoff of RE Note when a partial has been sold? - Posted by Judy

Posted by David Alexander on January 24, 2000 at 23:46:58:

Judy,

This should be posted on the CashFlow Forum Board. If you could provide the numbers of the actual note it would be easier to help you, without my answer will limited to a make believe note.

So here goes.

You have to find the present value of the payment streams, the one you sold and the one you retained, the payment stream you kept will have to be discounted down to it’s current present value. Not just the value of the payment stream itself.

David Alexander

How do I divide early payoff of RE Note when a partial has been sold? - Posted by Judy

Posted by Judy on January 24, 2000 at 21:36:19:

I sold 119 payments of a note and retained the last 60. The purchaser of the 119 assumed a first mortgage and paid some cash. The buyers of the house now want to pay off the Note and I don’t know what portion of the payoff goes to the purchaser of the 119 payments. HELP!!

Re: How do I divide early payoff of RE Note when a partial has been sold? - Posted by Judy Miller - American Note

Posted by Judy Miller - American Note on January 25, 2000 at 11:49:52:

I just posted a detailed analysis of how to do this, what the formula is, etc. Please read this and see if it helps!

Judy Miller

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:

Judy,
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!

Happy Investing!

Steve Cook