Selling Mortgage

A mortgage note is a legally binding document that defines the terms of a loan for the purchase of a property. Also called a promissory note, the mortgage note is the instrument for the loan and declares the sum of money to be repaid and the conditions for its repayment.

A private mortgage is a loan that is financed through a private source rather than a traditional lender. The lender could be a friend or family member, a business, or the seller of the property. When the home loan source is the seller, this is referred to as a seller-financed mortgage note.

Mortgage notes are easy to liquidate, so those who hold them might sell them for various reasons.

Reasons to Sell a
Mortgage Note

There are some risks associated with holding a mortgage note. A note owner is acting as a bank would in a traditional mortgage lending arrangement. The note holder is responsible for collecting payments and assumes the risks associated with the borrower’s failure to pay. A common reason to sell a mortgage note is to mitigate one or more of those risks.

But the risk isn’t the only reason a lender may want to sell a mortgage note. Because mortgage notes are a quick source of liquidity, there are many advantages to selling.

The sale of a mortgage note can finance:

Death or divorce

There is often a need to divide assets between two or more people in these instances. It's easier to distribute a mortgage note if it's sold and the involved parties split the proceeds equally.


Sometimes, unexpected expenses total far more than a person’s or family's available liquid funds will cover. A mortgage note is a relatively easy-to-sell, high-value asset, so selling it can provide the owner with the funds they need to address an urgent financial need.

Major life events

Whether sending a child to college or planning a wedding, some life events might require more money than many people have on hand. A mortgage note can be a great source of funding for such events.

Paying down debt

A mortgage note brings in money every month, which can help with paying the bills. However, sometimes it's desirable or necessary to pay off a debt in full. Selling a mortgage note allows the note holder to trade that portion of their monthly income for reduced monthly expenses.

Need for Capital

Mortgage notes can be an easy investment but not as strong as a successful business. Selling a mortgage note can provide a potential entrepreneur with the capital they need to get their business off the ground.

Who Buys Mortgage Notes?

Many of the features that make mortgage notes convenient and lucrative sources of income are attractive to investors. If a person is looking to invest in real estate without the hassle of becoming a landlord, mortgage notes are a great option. Entire businesses exist to purchase mortgage notes and similar assets. Deed Street Capital has been buying privately held mortgage notes for more than 20 years and can close your deal in as few as 30 days.

Finding the Ideal Buyer

The first step to selecting a buyer is finding one who buys the type of mortgage note you own. This precludes individuals and companies that purchase only from banks and other traditional lenders. Note, too, that even those who do buy private mortgage notes might not buy your particular type of note.

While private mortgages have attached notes, the underwriting process is significantly less structured than the process for traditional lenders. It’s even possible that the loan represented by the mortgage note isn’t secured, which is common with loans made by friends or family. In these cases, it can be significantly more difficult to find a buyer.

How much you can expect to receive varies from purchaser to purchaser. You would be wise to compare several offers before selling your real estate note. Deed Street Capital commits to matching or beating any bona fide written offer for your private mortgage note.

You should also be aware of scammers and other shady dealings. Since some private mortgage note sellers need quick cash, there’s no shortage of people looking to take advantage of the situation. If a company asks you to sign an agreement before they’ve made an offer, it’s best to avoid them.

Finally, you should perform due diligence. Start with an internet search for the company. If it doesn’t have a website, it’s a red flag. And if you find numerous complaints in the search results, you should avoid the company.

What Is a Note Buyer Looking For?

Typically, a potential buyer is looking for information about the loan itself and information about theborrower. Details about the loan will include:

Loans with a higher down payment are perceived to have a more invested borrower, who is less likely to default on the loan and leave the purchaser of the mortgage note in a bad financial situation.

Although the buyer can’t raise the loan’s interest rate, they depend on it to make money above and beyond the principal amount. Higher rates increase the note’s worth.

The longer the loan term, the longer the person purchasing the note must wait to recoup their investment. Shorter loans mean faster turnover and a more valuable note.

Should the borrower refuse to pay, the new owner of the mortgage note will need to foreclose on the property. The more money they can get for the real estate, the more they’ll be willing to offer.

A potential mortgage note purchaser evaluates the same factors that a traditional lender would assess. They include:

  • Whether the borrower is current on their payments
  • The borrower’s credit score
  • The borrower’s current income and ability to continue making payments

This information helps the investor determine how likely the borrower is to finish paying off the note.

How Much Is a
Mortgage Note

The value of a mortgage note depends on several variables. Reputable buyers may offer around $0.70 on the dollar for the remaining principal balance, depending on the amount of risk they must take on should they purchase the note. Since someone purchasing an existing mortgage note can’t raise the interest rate to offset a riskier investment, they’ll lower the offer price instead.

Increasing the Value of a Mortgage Note

Many factors that determine the value of a mortgagenote are beyond the current owner’s control. However, one of the most significant things they can control is paperwork. Buyers want to see timely payments, so proper record-keeping and proof of those payments are necessary.

While a note holder has littlecontrol over whether a borrower pays, they do have some small measure of control over a borrower’s credit score. By working with a loan servicing company, note holders can ensure that timely payments are reported to credit agencies.

Knowing the factors that a potential buyer looks for at the beginning of the process can help you create better terms for a future sale. Helping the borrower maintain good credit, setting the shortest possible loan period, and ensuring collateral to secure the loan will increase a note’s sale price should the mortgage note holder decide to sell at some point.

How Does a Mortgage Note Sale Work?

Selling a mortgage note isn’t always a quick process, but it is fairly straightforward. The seller may opt for a full buy-out or a partial sale. Once the terms of the sale are established, the potential buyer will ask for all available documentation relating to the loan. This includes terms of the loan, payment histories, and any other information that can aid in the underwriting process.

Legal documents will be prepared once the note makes it through underwriting and a purchase decision has been made. All parties will then review and sign. After as few as 30 days, the closing is scheduled, and payments are made.

How to Sell a
Mortgage Note

If you have a mortgage note that you’re interested in selling, Deed Street would love to hear from you. The process is simple. To start, contact us for a free, confidential, no-obligation quote.

sold a mortgage note