How Do I Become a Mortgage Holder?
- One of the more common ways to become a mortgage holder is to hold a note on a home or property you're selling. Instead of the buyer of the home obtaining a mortgage from a bank or traditional mortgage lender, you as the seller of the property hold the note on the mortgage. The process is the same for you as the seller and for the buyer as if they were using a mortgage lender to buy the property. The difference is that you are the seller and the mortgage lender on the property. The terms, conditions and interest rate of the mortgage are set by you. All of the negotiations take place between you and the borrower. You can require the borrower provide you with a cash down payment and then you hold the mortgage note on the difference between the purchase price of the home and the amount of the cash down payment. For example, if you're selling the home for $100,000 and the borrower gives you a cash down payment of $10,000, you would hold the mortgage note for $90,000 ($100,000-$10,000). Typically, private mortgages are short-term mortgages for less than a five-year term, so the borrower would make monthly mortgage payments to you at the interest rate set under the terms of the mortgage. You can use a real estate attorney to draw up the contract and promissory note for the mortgage and record it in the public records just as a traditional lender would do.
- The other option for becoming a mortgage holder is to work with a note broker or a private mortgage broker. Note brokers act as liaisons between private mortgage holders and borrowers, so they match private loan borrowers with individuals that wish to be a private money lender. Again, these transactions are handled legally, with real estate attorneys drawing up the legal documentation and having everything signed by both the borrower and the private money lender. This is the common way for private money lenders to become mortgage holders when they do not have a property of their own to sell and hold a note on it.