Mortgage Note Buyers

Mortgage note buyers provide the owner of a mortgage note with a way to receive a lump sum of cash up front. Mortgage note buyers include individuals and institutions within the secondary mortgage note market.

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    Lindsey Crossmier

    Lindsey Crossmier

    Financial Writer

    Lindsey Crossmier is an accomplished writer with experience working for The Florida Review and Bookstar PR. As a financial writer, she covers annuities, structured settlements and other personal finance topics for Annuity.org.

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  • Updated: August 23, 2023
  • 5 min read time
  • This page features 4 Cited Research Articles
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How to Cite Annuity.org's Article

APA Crossmier, L. (2023, August 23). Mortgage Note Buyers. Annuity.org. Retrieved June 22, 2024, from https://dev.annuity.org/selling-payments/mortgage-notes/mortgage-note-buyers/

MLA Crossmier, Lindsey. "Mortgage Note Buyers." Annuity.org, 23 Aug 2023, https://dev.annuity.org/selling-payments/mortgage-notes/mortgage-note-buyers/.

Chicago Crossmier, Lindsey. "Mortgage Note Buyers." Annuity.org. Last modified August 23, 2023. https://dev.annuity.org/selling-payments/mortgage-notes/mortgage-note-buyers/.

Key Takeaways

  • Those looking into mortgage note buyers typically have a need for a large lump sum instead of regular payments. 
  • Many factors, like the number of remaining payments, determine the quote provided by the mortgage note buyer. 
  • You should verify the mortgage note buyer’s license by calling your state securities regulator to confirm credibility. 

What Are Mortgage Note Buyers?

Mortgage note buyers are investors, brokers, businesses and institutions that purchase mortgage notes to provide the owner of the mortgage note with a lump sum instead of regular payments. Mortgage notes can be bought on the secondary market. 

When a mortgage note is set up, the initial lender is the owner of the note, and the person agreeing to the loan is the borrower. Once a note owner decides to sell to a note buyer, the buyer becomes the new owner.

Did You KNow?

Most homeowners don’t realize their mortgage note doesn’t always stay with their original lender. Mortgage note buyers purchase these notes for passive income without the responsibility of property upkeep and management. 

When someone sells a mortgage note, the payments from the borrower do not increase or decrease in price. The payments stay level as they are sent to the new note owner. 

There are two main types of note buyers — private and traditional. While the sale process is typically the same, where your money goes is different. 

Private Mortgage Note Buyers

Traditional and private mortgages both include a mortgage note, but private mortgage payments are paid to an individual entity. This differs from traditional mortgage payments, where the borrower pays a bank.

The owner of a private mortgage note can decide to keep the note and receive the monthly payments from the borrower or sell the note to a mortgage note buyer. 

If the owner of the private mortgage note decides to sell it, the amount of money they will receive varies on a few different factors.

Factors that affect your private mortgage note’s worth:

  • Credit score of the borrower
  • The property’s worth
  • The amount and interest rate of the remaining payments
  • The length of the mortgage term
  • The down payment made on the note

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Choosing the Best Mortgage Note Company

Sellers should explore their options to ensure they’re choosing the best mortgage note-buying company. Consider which type of buyer best fits your needs and confirm they’re reputable before starting the selling process. 

If you decide to work with a note broker versus a direct note buyer, the first thing you should do is verify that the note broker is licensed and legitimate. While some states don’t require a special license, many states do require these businesses to obtain certified real estate broker licenses.

Ways To Verify a Mortgage Note Broker’s Credibility 

  • The U.S. Securities and Exchange Commission recommends calling your state securities regulator to confirm that the person or business is licensed. 
  • Verify the license by checking your state’s Bureau of Real Estate website. 
  • Check to see if the broker has had any disciplinary action taken against them.

Aside from verifying a note broker’s legitimacy through the Bureau of Real Estate, there are other signs of a trustworthy buyer to consider.

Criteria to look for in a mortgage note buying company include:

Trustworthiness
A trustworthy mortgage note buying company will provide you with a quote without asking you to sign something beforehand. If a company asks you to sign something beforehand, it should be seen as a red flag that they may not be trustworthy.
Experience
A mortgage note buyer that has more than a few years of experience purchasing mortgage notes will likely be more knowledgeable about the process and pricing than newer companies.
Accreditations
Although not all mortgage buying companies have accreditations, these can be helpful in identifying whether they have the necessary expertise in purchasing mortgage notes.
Reliability
A reliable company has accessible contact information.

Choosing a mortgage note buying company can be simple when you know what to look for. Look for a company that is responsive and can answer all your questions. 

If the company you’ve chosen to work with isn’t providing you with enough information, explore other options and shop around to find the best mortgage note buyer for your needs.

How Do I Sell My Mortgage Note?

The first step in selling your mortgage note is to determine if you want a full purchase buyout or a partial purchase. If you plan on a partial purchase, make sure the buyer you’re considering accepts partial purchases. 

Five steps can simplify the process and help guarantee you’re receiving a fair quote. 

5 Steps To Sell a Mortgage Note 

  1. Gather the necessary information from your mortgage note and familiarize yourself with the details, such as the amount, length of time and interest rate.
  2. Research multiple mortgage note buyers and verify their licenses to choose a company that best suits your needs.
  3. Contact the mortgage note buying company and provide them with your mortgage note information to receive a quote. Your quote is based on the current market, the estimated cost of the property, the specified terms of the note and the rates of competitors.
  4. Thoroughly read the fine print of the purchase once you receive your quote.
  5. Accept the offer and the buying company will pay the decided amount.

Mortgage Note Buyers FAQs

Who holds the mortgage note?

The lender holds ownership of the mortgage note. If the lender decides to sell the note to a note buyer, the buyer becomes the new owner. 

Can I sell my mortgage to someone?

You have the legal right to sell your mortgage note to investors, brokers, businesses and institutions.

Is a mortgage note a legal document?

Yes — a mortgage note is a legal document that sets your terms when closing on a mortgage. 

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: August 23, 2023

4 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. Property Club. (2023, April 21). Investing in Mortgage Notes Guide. Retrieved from https://propertyclub.nyc/article/mortgage-note-investing
  2. U.S. Securities and Exchange Commission. (2023). Promissory Notes. Retrieved from https://www.investor.gov/protect-your-investments/fraud/types-fraud/promissory-notes
  3. CA Realty Training. (2022, March 21). Mortgage Markets Explained: Primary vs. Secondary. Retrieved from https://www.carealtytraining.com/blogs/mortgage-markets-primary-secondary
  4. Carlson, D. (2019, December 3). Mortgage Notes Are Good Real Estate Investments. Retrieved from https://money.usnews.com/investing/real-estate-investments/articles/why-buying-mortgage-notes-are-good-real-estate-investments