Where the note is assigned to the buyer for the partial, the buyer holds the note and the recorded lien while it runs, and you hold a written right to the payments you kept and to the return of the note afterwards. Buyers do not all structure it that way, so your agreement is what decides it.
Ownership at a glance
Assuming the note is assigned to the buyer, the practical questions come out like this.
| Question | Answer during the partial |
|---|---|
| Who receives the monthly payment | The buyer, directly or through a servicing company |
| Who the payer deals with | The buyer or the servicer |
| Who can enforce the note on default | The buyer, on terms the agreement should set out |
| Who receives an early payoff | The holder receives it, then it is divided between you as the agreement says |
| Who can change the payer’s terms | Neither of you alone, if the agreement is written well |
Look hard at the last row. A buyer who could extend the term or cut the rate without asking you could change the value of the part you kept, so ask whether your consent is required for any modification.
Why the buyer takes the paper
A buyer paying a lump sum for future payments, which is what a partial purchase is, wants to be able to collect them and to enforce the note if they stop. The note is therefore transferred to the buyer for the length of the partial, using two documents. One is an endorsement of the note, by which you sign it over much as you would sign over a check. The other is an assignment of the mortgage or deed of trust, which transfers the lien on the property and is recorded in the county records.
On the public record, and as far as the payer is concerned, the buyer is the note holder during those years.
The part that stays yours
You sold a set number of payments. Everything after them is still yours, along with the reversion, which is the right to have the note assigned back once the buyer has been paid.
Your ownership sits in the partial purchase agreement. Unless something is recorded to show it, it does not appear in the county records, and that is the main difference between your position and the buyer’s while the partial runs.
Illustrative example. On a note with 168 payments of $1,140 left, a 60-payment partial gives the buyer the next 60 payments. The other 108, with about $94,950 owed when they begin, belong to you under the agreement.
Because the buyer holds the paper, the protection for your share has to be written in. Buyers do this in different ways, so ask which of these applies to you:
- The agreement states your retained payments and obliges the buyer to reassign the note when their payments are complete.
- A document describing your interest may be recorded, so that anyone searching the title can see it.
- The reassignment may be signed at closing and held by a neutral third party until the partial ends.
- A servicing company may collect the payments and keep a record you can both see.
Ask too what happens if the buyer sells their position, since the agreement should bind whoever holds the note next. Offers can differ on these points as well as on price, so when you send us your note details, ask how each buyer quoting a partial structures ownership.
The effect of these documents depends on state law, so have an attorney read the agreement before you sign. Go in knowing what to look for in a partial purchase agreement, so that you can ask about any protection that is missing.
When ownership returns to you
Once the buyer has received the payments they bought, getting your note back follows a set order: the note is endorsed back to you, a new assignment of the mortgage or deed of trust is recorded in your name, and the payer is told to pay you again. From then on you are the holder in every sense.
The question to put to a buyer
Before you accept any partial, ask the buyer directly: during the partial, what do you hold, what do I hold, and where is each written down? A buyer with a settled way of structuring partials can answer in a few sentences, and the answer should match the draft agreement. Where the two differ, the agreement is what counts, so have the draft corrected before you sign it.
Related questions
Is my name still on the mortgage during a partial?
Not on the public record, if the mortgage or deed of trust is assigned to the buyer and that assignment is recorded. Your interest is set out in the partial agreement and, with some buyers, in a recorded document.
What happens to my share if the partial buyer sells the note?
The agreement should bind anyone who takes over the buyer's position, so your right to the remaining payments and to reassignment carries over. Ask to see that clause, and have an attorney confirm it before you sign.
Can I be the one who holds the original note?
Some structures leave the documents with a neutral custodian or servicer instead of either party. A buyer who needs the original to enforce the note will not want it left with the seller. Ask each buyer how they handle it.