GLOSSARY
Note Selling Terms, Explained in Plain English
Selling a note comes with a lot of unfamiliar words. Here's what they actually mean, in plain English, with no jargon. If anything is still unclear, Andy is always happy to walk you through it.
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The Basics
Mortgage Note
- A mortgage note is the document that spells out a home loan: the amount owed, the interest rate, and the payment schedule. If you sold a property and let the buyer pay you over time, the mortgage note is what you hold, and it's the thing we buy. Learn how to sell your mortgage note.
Promissory Note
- A promissory note is a written promise from a buyer to repay a set amount of money on set terms. When you carried the financing on a property you sold, this is the IOU in your hands. People often use 'promissory note' and 'mortgage note' to mean the same paperwork. Learn how to sell your promissory note.
Trust Deed / Deed of Trust
- A deed of trust, sometimes called a trust deed, is the document that ties a home loan to the property in states like California. It does the same job a mortgage does in other states. So in California, a 'mortgage note' and a 'trust deed' are everyday cousins, and we buy both. Learn more about selling a trust deed in California.
Seller Financing
- Seller financing is when you, the seller, act as the bank and let the buyer pay you over time instead of getting a loan from a bank. You collect the monthly payments, and you hold a note that you can later sell for cash if you choose. Read more: What is seller financing?
Owner Financing
- Owner financing is the same idea as seller financing: you finance the buyer directly and collect the payments yourself. The two terms are used interchangeably. Read more about owner financing.
Types of Notes & Sales
Land Contract
- A land contract is an agreement where the buyer makes payments to you over time, and you keep the title to the property until it's paid off. It's a common form of seller financing, especially on land and rural property, and it can be sold like other notes.
Contract for Deed
- A contract for deed is another name for a land contract. The buyer pays over time and receives the deed once the balance is paid in full.
Partial Note Sale
- A partial note sale is when you sell some of your future payments for cash now and keep the rest. It's a good fit when you need a specific amount of money but still want income coming in. You choose how much to sell and how much to keep. See how a partial note sale works.
Performing vs Non-Performing Note
- A performing note is one where the buyer is making payments on time. A non-performing note is one where they've fallen behind or stopped paying. Both can be sold — and yes, we buy non-performing notes too. Learn more about selling a non-performing note.
Seller Carryback
- A seller carryback (or carryback note) is the financing you 'carry back' for the buyer when you sell a property, instead of the buyer getting a bank loan. It results in a note you hold and can later sell.
How Value & Payment Work
Discount Rate
- The discount rate is the rate used to figure out today's lump-sum value of your future payments. It's the main reason an offer is less than the remaining balance: money you receive today is worth more than the same money spread over years. A higher discount rate means a lower lump sum today. Why is an offer less than the balance?
Loan-to-Value (LTV)
- Loan-to-value compares the amount still owed on the note to the value of the property behind it. A lower LTV — meaning more equity in the property — generally makes a note more valuable and safer to buy.
Down Payment
- The down payment is the amount the buyer paid up front when they bought the property. A larger down payment usually makes a note worth more, because the buyer has more of their own money at stake.
Interest Rate
- The interest rate is the rate the buyer agreed to pay on the note. It affects both the size of the monthly payments and how much a buyer like us will offer for the note.
Term
- The term is how long the loan runs — the number of months or years of payments. A shorter remaining term means the payments finish sooner, which affects what the note is worth today.
Balloon Payment
- A balloon payment is a large final payment due at the end of some notes, after a stretch of smaller monthly payments. Not every note has one, but it's worth knowing whether yours does.
Seasoning
- Seasoning refers to how long the buyer has been making payments on the note. A note with a longer track record of on-time payments — more 'seasoning' — is generally more valuable.
Payment History
- Payment history is the record of whether payments have been made on time. A strong, consistent payment history is one of the biggest factors in what a note is worth. Keeping good records helps you get a better offer.
Process & Roles
First Lien / First Position
- A note in first lien (or first position) is first in line to be paid if the property is sold or foreclosed. First-position notes are generally safer and worth more than notes in second position, which get paid only after the first is satisfied.
Note Servicing
- Note servicing is the month-to-month work of collecting payments, tracking the balance, and sending statements. When we buy your note, servicing transfers to us, so the person paying keeps the same experience — only the payment address changes.
Due Diligence
- Due diligence is the review a note buyer does before purchasing: checking the note documents, the payment history, the title, and the property. It's a normal, standard step, and we handle it for you.
Title & Closing
- Title and closing is the final step where ownership of the note is transferred and you get paid. We handle the title work and cover the closing costs, and we can arrange for a notary to come to you if that's easier.
Assignment
- An assignment is the legal document that transfers the note from you to the buyer. Signing it is how the note officially changes hands at closing.
Still have questions about your note?
Andy's happy to walk you through it. There's no cost to find out what your note is worth.