Discounted mortgage for investment

October 14, 2006 — Leave a comment
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Discounted mortgage for investment

What is a discounted mortgage?

A discounted mortgage means you can buy the existing mortgage at a discount, that is to say, for less than the principal balance owing.  Thus you might be able to buy a mortgage with a current principal balance of $40,000 for $35,000.

If you can find an investor who is willing to pay you $37,000 for this mortgage, the $2,000 difference is your profit.

An existing mortgage is a mortgage that someone else is already receiving payments on. Nothing changes for the borrower if you buy this mortgage. They simply send their payment to you instead of the original lender.

What is a mortgage?

Although a mortgage is commonly used to describe a loan that is secured by real estate, a  mortgage is really the security instrument or document. The promise to pay is a separate document, called a promissory note or simply a note.

The mortgage (or Deed of Trust in some states) is almost always recorded in the County Courthouse. The mortgage is signed by the borrowers in front of a notary and must be witnessed, usually by two witnesses. It bears a Notary Seal.

The note is the shorter document. It is not usually recorded although it can be recorded. The promissory note is not usually witnessed but must be signed by the borrowers.

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