Mortgage Notes
What are Mortgage Notes?
Mortgage notes are financial instruments that represent a loan secured by a property. When a borrower takes out a mortgage to purchase real estate, the lender provides the funds, and in return, the borrower signs a mortgage note. This note outlines the terms of the loan, including the interest rate, repayment schedule, and the total amount borrowed. Essentially, it is a legally binding contract between the borrower and the lender, serving as proof of the debt owed.
For investors, mortgage notes can be an attractive investment opportunity. By purchasing existing mortgage notes, investors can earn interest on the loan, providing a steady income stream. The interest rate specified in the mortgage note determines the return on investment, making it a crucial factor for potential investors to consider.
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.
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 BHs 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 BH.
- 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
Have a Question?
FAQ
We are here to help you 7 days a week and respond within 24 hours. Plus, you can find most answers to your questions right on this page.
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.
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.
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.