Mortgage Notes

This page explains what a mortgage note is, how it works, and the different types available. If you’re ready to sell your note, visit our Sell My Mortgage Note page for pricing, options, and a free quote.

What are Mortgage Notes?

A mortgage note — also called a real estate note, promissory note, or deed of trust note — is a legally binding financial document that represents a loan secured by a property. When a buyer purchases a home or investment property using owner financing, the seller becomes the lender. The buyer signs a mortgage note promising to repay the loan under specific terms.

The note spells out:

The total amount borrowed
The interest rate
The monthly payment amount
The repayment schedule (term length)
What happens in the event of default

The mortgage note works alongside the mortgage or deed of trust, which uses the property itself as collateral. For a real-world example of how this looks in practice, see our owner financing example.

How Does a Mortgage Note Work?

Origination: When a property is sold using owner financing, the buyer signs the mortgage note at closing. The seller (now the note holder) receives monthly payments with interest instead of a lump sum.
Colateral: The note is secured by the property. If the buyer defaults, the note holder has the right to foreclose and recover their investment through the property.
Transfer: One of the most important features of a mortgage note is that it can be bought, sold, or transferred. A note holder can sell all future payments — or just a portion of them — to a note buyer like Seascape Capital, receiving a lump sum in return.
Enforcement: If a borrower defaults, the note holder (or whoever owns the note at the time) can enforce repayment or initiate foreclosure based on the note’s terms.

Key Points About Mortgage Notes

Serves as legal proof of the mortgage debt
Includes loan amount, interest rate, payment schedule, and default consequences
Signed by the borrower at loan closing
Recorded in public records alongside the mortgage or deed of trust
Can be bought, sold, or transferred between investors

For definitions of terms commonly found in mortgage notes, visit our common terms glossary.

Types of Mortgage Notes

Performing vs. Non-Performing Notes

Performing notes are loans where the borrower is making regular, on-time payments. These are the most attractive to note buyers because they offer predictable, lower-risk cash flow.

Non-performing notes are loans where the borrower has defaulted or fallen behind. These carry higher risk but can still be sold, typically at a steeper discount.

Residential Mortgage Notes

Used for single-family homes, condominiums, townhouses, and 1–4 unit properties. These are the most common type and generally the easiest to sell because they carry the lowest risk — especially when the borrower lives in the property (owner-occupied).

Commercial Mortgage Notes

Used for commercial properties such as office buildings, retail spaces, industrial facilities, and apartment complexes with 5 or more units. Visit our commercial note buyer page to learn how commercial notes are evaluated and priced.

Land Notes

Notes secured by vacant or undeveloped land carry the highest risk because land produces no income and no structure acts as collateral. Our vacant land note buyer page covers what to expect when selling a land note.

Mobile Home Notes

Notes on mobile homes with land attached can be sold, evaluated based on whether the home is on a permanent foundation and whether the land title is clear. Visit our mobile home note buyer page for specifics.

Want to know what your note is really worth?

What Makes a Mortgage Note Valuable?

Not all mortgage notes are priced equally. When a note investor evaluates a note, they assess several factors that determine risk — and risk determines price. For a detailed explanation of how discounting works, see our Why Is There a Discount page.

Property type — Owner-occupied single-family homes represent the lowest risk. Vacant land and specialty commercial properties represent the highest.
Borrower credit — A borrower with a FICO score of 700 or higher signals a much lower chance of default. Higher credit = lower risk = better price for the note holder.
Interest rate and term — Notes with higher interest rates and shorter terms are more valuable. A 15-year note is more attractive than a 30-year note.
Down payment — A 20–25% down payment shows borrower commitment. Notes with little or no down payment are considered riskier.
Seasoning — A note with 12 months of consistent on-time payments is significantly more valuable than a brand-new note.
Documentation quality — Notes prepared by an attorney or title company with a promissory note, deed of trust, and closing statement are worth more than informally written notes.

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.

Frequently Asked Questions About Mortgage Notes

What is the difference between a mortgage note and a mortgage?
The mortgage note is the borrower’s written promise to repay — it outlines the loan terms and the obligation. The mortgage (or deed of trust) is the security instrument that pledges the property as collateral. Both are signed at closing.

Is a mortgage note the same as a promissory note?
A promissory note is a broader term for any written promise to repay a debt. A mortgage note is specifically a promissory note secured by real property.

Can a mortgage note be transferred without the borrower’s consent?
Yes. Under the terms of most mortgage notes, the note holder can sell or transfer the note without the borrower’s approval. The borrower must simply be notified of the change in ownership.

What happens to the borrower when I sell my note?
Nothing changes for the borrower — same loan terms, same payment amount. They simply direct future payments to the new note holder.

How long does it take to sell a mortgage note?
The typical timeline is 4–5 weeks from start to funds received. Visit our Sell My Mortgage Note page for a full step-by-step walkthrough.

Do I need a lawyer to sell my mortgage note?
No. The note buying company handles all paperwork and pays for document review, title work, and the appraisal — there are no costs to the seller.

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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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.