Mortgage Notes

What are Mortgage Notes?

Mortgage notes are financial documents that represent a loan secured by a property. When a borrower takes out a mortgage, the lender provides the funds, and the borrower signs a mortgage note. This document outlines the loan terms, including the interest rate, repayment schedule, and total amount borrowed. It is a legally binding contract between the borrower and the lender, serving as proof of the debt.

For investors, mortgage notes can offer consistent income. By purchasing existing mortgage notes, investors can collect regular payments with interest, creating predictable cash flow. The interest rate specified in the note directly influences potential returns, making it a key detail to evaluate before investing.

Key Points About Mortgage Notes

Serves as proof of a mortgage debt
Details loan amount, interest rate, repayment period, and default consequences
Signed by the borrower at loan closing
Can be bought, sold, or transferred between lenders

What Does a Mortgage Note Do?

A mortgage note is a written promise to pay back a mortgage loan under specific terms. It is usually recorded in public records along with the mortgage or deed of trust and serves as legal proof of the loan. The note establishes the borrower’s obligation and the lender’s rights if payments are missed.

How Does a Mortgage Note Work?

Origination: When you take out a mortgage, you sign the note, agreeing to repay the lender under the stated terms.
Security: The mortgage note works alongside the mortgage or deed of trust, using your property as collateral.
Enforcement: If you default, the lender can enforce the note—often by foreclosing on your property.
Transfer: The lender can sell your mortgage note to another investor or mortgage servicer, who then collects payments and enforces the note.

Types of Mortgage Notes

There are various types of mortgage notes available for investors, each with unique characteristics and benefits. Performing mortgage notes are loans where the borrower is making timely payments. These notes offer a relatively low-risk investment opportunity, providing steady returns through regular monthly payments.

On the other hand, non-performing mortgage notes are loans where the borrower has defaulted or is behind on payments. While these notes come with a higher level of risk, they also offer the potential for higher returns. Investors who are willing to take on the additional risk can purchase non-performing notes at a discount and work to rehabilitate them, potentially achieving significant profits.

The most common types of mortgage notes include commercial mortgage notes, which finance commercial properties, and residential mortgage notes, used for single-family homes. Each type offers different risk and return profiles, allowing investors to choose based on their risk tolerance and investment goals.

Want to know what your note is really worth?

Evaluating a Mortgage Note

When evaluating a mortgage note, several critical factors must be considered to determine its potential value and risk. One of the most important aspects is the creditworthiness of the borrower. A borrower with a good credit history is more likely to make timely payments, reducing the risk for the investor.

The property value is another crucial factor. The value of the underlying real estate impacts the potential return on investment and provides security in case of borrower default. Investors should also examine the interest rate and repayment schedule outlined in the mortgage note, as these will directly affect cash flow and overall returns.

Additionally, the condition of the property and the local real estate market should be assessed. Properties in good condition and located in thriving markets are more likely to appreciate, enhancing the investment’s value. By carefully evaluating these factors, investors can make informed decisions and select mortgage notes that align with their investment strategy.

Why Sell A Mortgage Note

You are holding a mortgage note (also known as a Real Estate Note, Purchase Money Mortgage, or Deed of Trust Note) but need cash now. Selling mortgage notes can offer benefits compared to holding other types of real estate assets, such as avoiding the responsibilities and risks associated with managing rental properties. You might need cash for:

Reducing credit card bills or other debt
Retirement expenses
Paying medical bills
Starting a business
New investment opportunities
Settling an estate for your heirs

Where to Sell a Mortgage Note

If you’re looking to sell your mortgage note, there are several avenues available to find potential buyers. The key is to identify reputable mortgage note buyers who offer competitive prices and a smooth transaction process. Some of the most common places to sell a mortgage note include:

Private Buyers: Individual investors who specialize in buying notes can offer flexible terms and quick transactions.
Note Buying Companies: Companies like Seascape Capital provide free quotes and handle all paperwork, making the process hassle-free.
Online Marketplaces: Platforms dedicated to note sales connect sellers with potential buyers quickly.
Real Estate Investment Groups: These groups often seek mortgage notes for portfolio diversification.

Research buyers carefully to ensure a smooth, valuable transaction.

Maybe You Just Want To Simplify Your Finances and Not Worry About

Tracking payments, insurance, and property tax payments
Bankruptcy or job loss by the note payer, resulting in a default on the note
Destruction of property

Selling mortgage notes with a fixed interest rate can simplify your finances by providing predictable income and reducing the risk of fluctuating interest rates. This can be particularly beneficial for managing short-term financial obligations.

Experience & Integrity For You To Sell Your Note Quickly

Contact us with information about your property and with details about your mortgage note or deed of trust note.
Receive a response within a few hours directly from the trust deed note buyer at Seascape Capital.
With your approval of the quote that we offered, we request a small amount of paperwork. We pay for document review, the property appraisal, and any title work that is needed, along with other expenses.
Generally, you receive your funds within 4-5 weeks from the start date.
No closing costs, fees, or points in the sale of your note, as we pay for everything.

Three Easy Ways to Get Answers
from a Top Note Expert

For expert, free advice about finding a note buying company and understanding the process for selling a mortgage note, watch the video “Getting the best price for my note” on the home page
To get a quick overview on how to get cash for your note from a mortgage note investor, view the information below or look at the several articles under the “Mortgage Notes” heading above
To obtain an offer and sell your note to the best note company, click on the purple rectangle to the right of this line and complete the online form

We Can Assist You With Selling
Mortgage Notes on Nearly Any Type of Property

Houses
Townhouses/Condos
1-4 Family Units
Mobile Homes with land

Office
Retail Apartment (5+ family units)
Industrial

Developed Land (with utilities like power and water either on the property or up to the property line)

Written by Alan Noblitt

Alan Noblitt is the President of Seascape Capital, LLC, and works as both a real estate note buyer and a business note broker. Alan has an MBA from Arizona State University, a B.S. from the University of Wyoming, and is licensed as a California Real Estate Note Buyer.

Frequently Asked Questions

What is a mortgage note buying company?

It is a company that can assist note holders by buying all or some of the payments on their owner-financed mortgage note. By the way, it is the same as a real estate note buyer, deed of trust buyer, note investor, or simply mortgage buyer.

Is there a difference between a deed of trust and mortgage?

Yes, but for most note holders, it is not really material. Most often, mortgage notes are created in states known as judicial while deed of trust notes are created in non-judicial states. The difference mainly applies if there is a default and a need to foreclose on a property.

How long does it take to sell my real estate note?

While it can vary depending on a variety of factors, the normal time frame is about 4-5 weeks from starting the process until funds are transferred to you, the note holder.

For more information on the value of your mortgage note from the nation’s premier real estate note buyer and a free no obligation quote, call today at 1-858-208-7776 or fill out our easy quote form.

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