A mortgage note is a legal document connected to a mortgage loan. It documents the promise to repay money borrowed to purchase real estate. Also referred to as a promissory note, this document includes specific information regarding the amount of funds borrowed, interest rate and who is responsible for repayment.



People who hold a mortgage note can sell them to mortgage note buyers in order to obtain a lump sum of cash. There are many reasons people choose to sell their mortgage note to a private investor. However, the most common is to obtain funds to pay off debt, medical expenses or college tuition. Investors who purchase the note will pay cash to the note holder and take over receiving monthly payments paid to the previous owner.

The first step of selling your mortgage note to a real estate investor requires providing specific information about the note. The private investor will need to know the face value of the note, balance due, interest rate, number of payments made, status of the note (current or delinquent), asking price, etc.

If the investor is interested in purchasing your mortgage note he will make an initial offer. Should you decide to continue negotiations, you will be required to provide additional documents such as a current tax return, pay stubs or income statement, title insurance and amortization schedule.

The second step to selling your mortgage note requires obtaining an appraisal of the real estate. Typically, this involves hiring the services of a professional appraiser. Some private investors will cover the cost of the appraisal; however, this expense is usually the responsibility of the note holder. Occasionally, a "drive-by" inspection may be all that is required. Be certain to clarify the type of appraisal required and who is responsible for the cost prior to entering into a contract with a private investor or mortgage note buying company.

The final step of selling your mortgage note involves closing the deal. The primary document signed at closing is known as an Assignment of Mortgage. This document transfers all or part of future payments to the private investor. The Assignment of Mortgage must be recorded at the local courthouse and all closing conditions must be met prior to the disbursement of funds.

The original security instruments will remain in your name. The Assignment of Mortgage agreement outlines the number of future payments which have been sold. If you are selling a partial note, a Partial Purchase Agreement will be drafted. Once the terms of the partial agreement have been met, the mortgage balance or agreed-upon amount reverts back to you.

The closing process can take place in person or by mail. When done in person you will receive a copy of the closing document prior to the meeting. You will be required to bring original copies of security documents including the deed of trust, mortgage, and contract for deed of the property you are selling. Once everything has been approved the mortgage note investor will issue a check or wire transfer funds directly into your bank account.

Depending on the circumstances and amount of the transaction, selling a mortgage note to a private investor can take a few weeks to a few months to complete. When seeking out a private investor engage in due diligence and conduct research to ensure you are conducting business with a professional who possess integrity. Ask for references and contact individuals who have worked with the investor. Check with the Better Business Bureau to see if any derogatory reports have been filed.

Last, but not least, when selling your mortgage note to a private investor do not hesitate to ask questions and engage in numerous conversations. A reputable investor will be able to answer your questions, provide references and be fair in their negotiations.