On the same note, a full sale pays the larger check today and a partial pays the larger total over the years. Which one suits you comes down to how much cash you need now, how much you trust the payer, and whether you want the note back.
Pricing both on one note makes the trade visible, so that is what this page does. A partial, in brief, is the sale of a set number of payments, after which the note returns to you. If that is new to you, start with what a partial note purchase is and come back for the figures.
The note behind the figures
| Monthly payment | $1,140 |
|---|---|
| Payments left | 168 (14 years) |
| Interest rate on the note | 6% |
| Balance still owed | About $129,400 |
| Buyer’s target yield | 8% |
Illustrative example, used for every figure on this page. A weaker payment record, thin equity or a junior lien would push the buyer’s yield up and the prices below down.
Sold whole, sold in part, or kept
| Sell the whole note | Sell 60 payments | Keep it | |
|---|---|---|---|
| Cash today | $115,000 | $56,200 | $0 |
| Payments still coming to you | None | 108 of $1,140 | 168 of $1,140 |
| Total you receive | $115,000 | $179,320 | $191,520 |
| When the last dollar arrives | At closing | In 14 years | In 14 years |
The bottom two rows belong together. In total the partial pays $64,320 more than the full sale, yet most of that money arrives between year six and year fourteen, when a dollar buys less than it does today, and it arrives only if the payer keeps paying. Treat the totals as a way to compare the three columns and as nothing firmer than that.
What you give up in each column
In the full sale you are owed about $129,400 and receive $115,000. The $14,400 between them is the discount, here 11.1% of the balance. You also hand over all the interest the note would have paid across 14 years. What you get for that is an exit: if the payer stops paying next year, the loss falls on the buyer.
The 60-payment partial pays $56,200 for payments that add up to $68,400 over five years, a gap of $12,200. Once the buyer has collected them, the note returns with 108 payments left and about $94,950 owed to you. You have kept most of the note and, with it, most of the risk, because those later payments depend on the payer still paying in year six and after.
Keeping the note brings in the most money and none of it up front, with every year of risk left on your side.
Selling more payments, or fewer
Sixty is only one choice. At the same 8% yield, this note prices as follows:
| Payments sold | Cash today | Payments that come back | Balance owed to you when it returns |
|---|---|---|---|
| 36 (3 years) | $36,400 | 132 | About $110,000 |
| 60 (5 years) | $56,200 | 108 | About $94,950 |
| 84 (7 years) | $73,100 | 84 | About $78,000 |
| All 168 | $115,000 | 0 | $0 |
The first 36 payments raise $36,400. Selling all 168, nearly five times as many, raises $115,000, which is a little over three times as much. Each further year you add brings in less cash than the one before, because the buyer’s yield compounds against payments that are further away. A partial works by selling the payments buyers pay most for and holding on to the ones they pay least for.
That points to a way of sizing one: begin with the cash you need and sell the fewest payments that raise it. Someone who needs $50,000 from this note is looking at a partial of 60 payments or fewer, where a full sale would give up at least another 108 to raise money they had no use for. Your own note will price differently from this one, so the sizes will land in different places: send the details of your note with the amount you are aiming for and we will ask buyers for a partial sized to it alongside the full-sale price. If you are unsure of the amount, work through how many payments you should sell first.
Your payer and your purpose
A partial leaves you holding the back end of the note. If the payer has years of on-time payments behind them and real equity in the property, that back end is likely to be there when its turn comes. If the payer is already slipping, the certainty of a full sale carries more weight than the larger total a partial shows on paper.
What the money is for matters as much. A fixed need, such as a tax bill, a down payment or a debt to clear, suits a partial sized to that amount, and so does wanting the income to resume later. Dividing an estate or a divorce settlement calls for cash that can be split, and leaving note-holding behind for good calls for the same thing, so both lead to a full sale. If you have no need for the cash yet, the third column of the table is the one to read.
Two partials at the same price can be different deals
The tables assume the payer pays on schedule for the whole term. The partial agreement decides what you receive when that does not happen, so read it before you set a partial offer against a full one.
Take an early payoff. Suppose the payer refinances after 24 payments of a 60-payment partial, when the payoff on this note is about $116,800. A fair agreement pays the buyer what they are still owed for the 36 payments they have not received, about $36,400 at their yield, and sends the remaining $80,400 or so to you. An agreement that lets the buyer keep more than that is worth less than its price suggests, so ask each buyer to show you how an early payoff is divided in dollars.
Default is the other case. The agreement should state who chooses between working things out with the payer and foreclosing, who pays the costs, and what becomes of your share. Buyers handle this differently, and a cheaper-looking full sale can be the better offer next to a partial whose default terms leave you exposed.
Running the comparison on your own note
You need four figures to rebuild these tables: your monthly payment, the number of payments left, the interest rate and the current balance. With those, ask any buyer for a full-sale price and for a partial at two different sizes, all at a stated yield. What comes after you pick one, from the agreement through to the note coming back, is laid out step by step in the partial purchases guide.
Three prices from one buyer show you how fast the price falls off as the sale gets longer, which a single offer cannot. Put them in the three columns above, add a row for what you receive in total, and the choice is in front of you in your own numbers.
Related questions
Does a partial always pay more in total than a full sale?
On scheduled payments it does, because the payments that come back to you are collected in full. That total assumes the payer keeps paying for the whole term and takes no account of money being worth less in later years, so it is a comparison aid and no more.
Will a buyer use the same yield for a partial and a full sale?
The example on this page uses 8% for both so the figures can be compared. A buyer may price the two at different yields, so ask for the yield behind each offer and compare those as well as the prices.