Mortgage Notes

What Is A Mortgage Note?

mortgage promissory note is a document that spells out an agreement that the buyer in a real estate sales transaction owes the seller money for a part of the sale of the property.  The property could be a residence, a commercial property, or even just land.

The cash flows produced by mortgage promissory notes are created as part of an owner financing transaction.

Why Owner Financed Mortgage Promissory Notes Are Created

An owner financed mortgage note is a way for property owners to increase their chances of selling their property.

For those potential buyers who have otherwise good credentials but are unable to obtain a traditional bank loan, owner financing could provide a way for these buyers to still buy the property.

Instead owing a bank money through a loan, the buyer would be paying back the seller over time.

Mortgage Notes And The Cash Flow Industry

Just like there is a market for seller-financed business notes that can be bought and sold, there is also a market for buying and selling mortgage notes.

There are companies interested in investing in mortgage notes and there are plenty of mortgage notes that have been created over the years with owners that are willing to sell them for lump sums of cash.

Advantages For Mortgage Note Sellers

Mortgage note holders can use their promissory note as a cash source by selling all or even some of their future payments.  This money can be used to fund a vacation, to pay for a new car, or start a business.

Selling their note can also relieve mortgage note holders of the hassle that can accompany holding a note with issues such as making sure that the note payer is current with timely payments and worrying about what to do in the event that the payer were to default on the note.

Advantages For Mortgage Note Buyers

Those interested in investing in mortgage notes are obviously interested in earning a return on their investment.

They can earn money through either the interest rate of the purchased note, the discount for which they bought the note, or through foreclosing on the property in the event of a default on the note.

Even though foreclosing on a property is probably the least desirable method of earning money with a mortgage note, money can be earned by the mortgage note buyer through selling it for a profit.

Related Articles:

Owner Financing Property Sales

Learn more about how owner financing works.

Sell Your Mortgage Note

Learn the steps involved with selling your owner-financed mortgage note.



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