If you’ve ever sold property using owner financing, or if you’ve received payments on a real estate loan, then you likely hold what’s known as a promissory note. But what exactly is a promissory (or mortgage) note, and more importantly, can you sell your note for cash? In this article, we’ll take a deep dive into the structure, value, and liquidity of promissory mortgage notes—as if you’re taking a crash course on real estate finance.
What Is a Mortgage Note?
A promissory note, sometimes called a real estate note or private mortgage note, is a legal document that outlines the terms of a loan secured by real estate. It includes:
- The loan amount (principal)
- Interest rate
- Repayment schedule
- Payment amounts
- Maturity date
- Consequences of default
Essentially, it’s an IOU secured by a piece of property. When a homeowner gets a loan from a bank, the bank holds the note. But in owner-financed or private mortgage situations, an individual (like you) may hold the note.
Who Typically Holds Promissory Notes?
There are three main categories of people or entities that hold promissory notes:
- Banks and Lending Institutions
- Private Individuals (e.g., seller-financed transactions)
- Real Estate Investors or Companies (who buy notes as an investment)
Private note holders are often unaware that their note is a negotiable instrument—meaning it can be sold, just like a stock or bond.
Can You Sell Your Promissory Note for Cash?
Yes, you absolutely can sell some or all of your promissory note for cash, provided it meets certain criteria. This process is known as note buying or note investing, and it’s more common than many realize.
Companies like ours specialize in purchasing promissory notes from private individuals, offering a lump sum of cash in exchange for future payments.
Why Would Someone Sell Their Promissory Note?
Here are some common reasons:
- Immediate need for cash
- Tired of managing payments
- Risk of borrower default
- Better investment opportunities
- Estate or inheritance planning
Selling a promissory note converts a long-term cash flow into a lump sum, which can be reinvested or used for emergencies.
Factors That Determine the Value of a Promissory Note
If you’re considering selling your note, you should know that not all notes are created equal. Buyers will evaluate:
- Remaining Balance
- Interest Rate
- Payment History (Are payments current?)
- Borrower’s Creditworthiness
- Property Type and Location
- Equity in the Property
Higher-quality notes (e.g., high credit borrower, low LTV, strong payment history) typically sell for a higher percentage of the note’s balance.
Full vs. Partial Note Sales
You don’t always have to sell the entire note. You can opt for a partial note sale, where you sell a specific number of future payments and retain the remaining balance. This option offers flexibility and is often used by sellers who want some immediate cash but still retain long-term income.
How to Sell Your Promissory Note Online
Selling your note is a straightforward process:
- Get a Quote: Reach out to a reputable note buyer (like WebuyNotesLansing.com) for a free quote.
- Submit Documentation: Provide the note, payment history, and borrower information.
- Property Review: The buyer evaluates the property and borrower profile.
- Due Diligence: A title search and potential appraisal are conducted.
- Close the Deal: Once approved, you receive a lump sum payment at closing.
This process can take as little as 2-4 weeks.
Is Selling a Promissory Note Right for You?
Here are a few questions to ask yourself:
- Do you need immediate access to capital?
- Are you concerned about future payments being made on time?
- Would you prefer a clean exit over a 10-30 year payment schedule?
If you answered yes to any of these, selling your promissory note could be the right move.
Final Thoughts
Promissory notes are valuable financial instruments that can be sold for cash. Whether you’re looking to reduce risk, get out of the note business, or simply want to access funds now, selling your note is a legitimate and increasingly popular option.
At WebuyNotesLansing.com, we help local note holders in Lansing, MI, and across the state turn their promissory notes into cash quickly and easily.
Interested in finding out how much your note is worth? Contact us today for a free, no-obligation quote and explore your options.