How To Sell a Mortgage Note

You can sell all or part of a mortgage note in exchange for a lump sum of cash in exchange for all future payments on the loan. You can sell directly to a buyer, or you can sell through a broker. Potential buyers include private investors or institutions looking for long-term revenue.

Terry Turner, Financial writer for Annuity.org
  • Written By
    Terry Turner

    Terry Turner

    Senior Financial Writer and Financial Wellness Facilitator

    Terry Turner is a senior financial writer for Annuity.org. He holds a financial wellness facilitator certificate from the Foundation for Financial Wellness and the National Wellness Institute, and he is an active member of the Association for Financial Counseling & Planning Education (AFCPE®).

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  • Edited By Michael Santiago
  • Reviewed By
    Ebony J. Howard, CPA
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    Ebony J. Howard, CPA

    Credentialed Tax Expert

    Ebony J. Howard is a certified public accountant and freelance consultant based in Atlanta, Georgia. Ebony has a deep knowledge of the financial landscape and a background in accounting, personal finance and income tax planning and preparation.

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  • Updated: August 15, 2023
  • 5 min read time
  • This page features 7 Cited Research Articles
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APA Turner, T. (2023, August 15). How To Sell a Mortgage Note. Annuity.org. Retrieved June 15, 2024, from https://dev.annuity.org/selling-payments/mortgage-notes/how-to-sell-a-mortgage-note/

MLA Turner, Terry. "How To Sell a Mortgage Note." Annuity.org, 15 Aug 2023, https://dev.annuity.org/selling-payments/mortgage-notes/how-to-sell-a-mortgage-note/.

Chicago Turner, Terry. "How To Sell a Mortgage Note." Annuity.org. Last modified August 15, 2023. https://dev.annuity.org/selling-payments/mortgage-notes/how-to-sell-a-mortgage-note/.

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Key Takeaways

  • Selling your mortgage note liquidates your investment, giving you an injection of cash to spend or to reinvest.
  • If you want immediate cash but also want to continue receiving monthly payments, you can sell part of your mortgage note and keep the rest. 
  • You can sell your note directly to your buyer or enlist the help of a licensed broker for a small commission.
  • You’ll need to provide prospective buyers with information about the property, such as the value of the mortgaged property, the remaining balance on the loan and any terms the borrower agreed to. 
  • After you sell your note, you’ll get a lump-sum payment. If you sell the full note, you won’t receive any more loan payments.

Determine Why You Want To Sell a Mortgage Note

There are many reasons why you might sell payments from a mortgage note. You might want to pay off outstanding debts, pay for a larger upcoming purchase or free up money to invest in a new venture. 

Before you sell, consider how much return you’re getting on your note. Is it performing as expected? Or are your payments inconsistent? Is there a significant chance that your borrower will default on the loan?

If you sell your mortgage note, you won’t get any of the future payments that are due from that loan. Be sure to account for this tradeoff when deciding whether to sell. 

Choose How You Will Sell a Mortgage Note

There are two ways to sell your mortgage note: directly to a buyer or through a licensed broker. You’ll pay a small commission to sell through a broker, but brokers can help you find legitimate buyers willing to pay top dollar for your note. 

If you sell your mortgage note directly to an investor, you won’t have to pay any commission to a third party. However, that means you will need to do most (if not all) of the work of finding a buyer. It may take longer to find a qualified investor. You may also have a higher risk of fraud. 

You don’t have to sell the full mortgage note. You can retain ownership of some of the note by arranging a partial note sale. That enables you to receive monthly loan payments, even though they will be smaller.

Full Note Sale vs. Partial Note Sale

A full note sale transfers ownership of the full mortgage note to someone else. A partial note sale only transfers a share of the note.

In the case of a partial sale, the percentage of the payment you’ll receive in the future will mirror the percentage that you still own. You’ll retain the right to collect those partial payments if you own a portion of the note.

The terms and conditions of a partial note sale depend on the contract you establish with the buyer. Talk to an attorney or real estate broker to figure out how much of your note you want to sell and how much money you can get for it. You may want help drafting a contract that meets your financial needs and provides protection from a loan default and other legal remedies.

Finding a Mortgage Note Buyer & Receiving a Quote

The first thing you’ll need to do to sell your mortgage note is find a buyer. To find one, you can approach private investors and institutions, such as universities and pension funds. Some specialized investment companies also purchase mortgage notes. 

If you don’t know how to find potential mortgage note buyers, ask your attorney or real estate broker. Make sure the professional you work with is reputable and someone you trust. Your goal is to connect with legitimate investors.

Once you find a potential buyer, you’ll need to reveal the original terms of the mortgage and its current status. This information will help the buyer determine a price to offer you in exchange for all or part of the note. 

Three primary factors influence buyers’ offers:
  • The remaining balance on the note
  • The existing interest rate on the note
  • Repayment terms

If possible, solicit multiple offers for your note. Collect and review the various quotes before deciding. If you’re not in a hurry to get your money, you can afford to be selective. Being selective will usually get you a better financial deal. 

You and your buyer will sign a purchase contract that lays out the terms of the sale. Once the contract is signed, the buyer is likely to ask for a property appraisal.

Property Appraisal & Closing the Note Sale

A property appraisal is a valuation of a specific piece of property based on its condition, location, features and more. Once you choose the buyer, your buyer will pay for an appraisal on your property.

Mortgage note buyers often request property appraisals to determine the value of the property that the note’s loan is funding. This helps a buyer determine how much risk exists on a particular note. If an appraiser says a property has a higher value than the note’s remaining balance, buyers should be assured they will be able to collect the money they are owed, even in the event of foreclosure.

Once a buyer is satisfied with the appraisal, you can start the closing process. You’ll need to provide your buyer with the paper copy of the mortgage note, as well as the deed or land contract for the property. Your lawyer will let you know if you need any other documents to finalize the sale. 

What Happens After You Sell Your Mortgage Note?

Once you sell your mortgage note — assuming you sell the full note — ownership of the note transfers to your buyer, who will have the right to collect any payments made on the note after that point. 

The buyer also takes the responsibility of collecting the payments from the borrower and initiating any legal action (such as foreclosure) if the borrower defaults on loan payments. 

In exchange, you’ll receive a lump sum payment for the amount stipulated in your contract. You can put this money toward:
  • Paying off debts
  • Paying for a big purchase like a wedding
  • Making new investments
  • Funding your retirement

There are no restrictions on money from a mortgage note sale. You will have to account for the sale on your next federal income tax return (and state income tax return, if applicable).

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: August 15, 2023

7 Cited Research Articles

Annuity.org writers adhere to strict sourcing guidelines and use only credible sources of information, including authoritative financial publications, academic organizations, peer-reviewed journals, highly regarded nonprofit organizations, government reports, court records and interviews with qualified experts. You can read more about our commitment to accuracy, fairness and transparency in our editorial guidelines.

  1. Internal Revenue Service. (2022, May 19). Important tax reminders for people selling a home. Retrieved from https://www.irs.gov/newsroom/important-tax-reminders-for-people-selling-a-home
  2. Carlson, D. (2019, December 3). Mortgage Notes Are Good Real Estate Investments. US News. Retrieved from https://money.usnews.com/investing/real-estate-investments/articles/why-buying-mortgage-notes-are-good-real-estate-investments
  3. Jacobs, H. (2013, April 19). What to know before buying mortgage notes. The Washington Post. Retrieved from https://www.washingtonpost.com/realestate/what-to-know-before-buying-mortgage-notes/2013/04/18/0481cabe-a37d-11e2-be47-b44febada3a8_story.html
  4. White, A. (2012). Losing the Paper – Mortgage Assignments, Note Transfers and Consumer Protection. Loyola Consumer Law Review. Retrieved from https://lawecommons.luc.edu/cgi/viewcontent.cgi?article=1002&context=lclr
  5. Weise, S. (2011, December 31). KEEPING CURRENT: Setting the UCC Record Straight on Mortgage Notes. American Bar Association. Retrieved from https://www.americanbar.org/groups/business_law/publications/blt/2011/12/keeping_current/
  6. Klein, W. (2006, November 8). Re: Note Brokers. State of Utah Department of Commerce: Division of Securities. Retrieved from https://securities.utah.gov/wp-content/uploads/2021/09/letters_notebroker.pdf
  7. Maryland Department of Assessments and Taxation. (n.d.). Assessment Introduction. Retrieved from https://dat.maryland.gov/Documents/File05_AssessmentIntro.pdf