What is mortgage note investing?

by | May 13, 2021 | Blog

The fluctuations in our global market have affected our economy in various ways, thus leaving many investors in a challenging situation. Will you take risks to chase higher yields (like junk bonds), or you must look outside of the mainstream market. Many investors have turned to the real estate market to find a reliable source for assets. Real Estate has proven over the years to be the best place to gain higher yields. It offers different venues for your specific needs, in this article we will explore mortgage note investing.


Here’s how Lorraine Millington from Melanin Homes, an expert on this subject explains it :

When you buy a house, you acquire a loan and start making monthly payments to repay it. That is a real estate note. The document that describes the details of your loan is called a mortgage note. What many people don’t know is that these notes can be traded. These loans can be sold to a lender, and many investors have used this opportunity to make profits.


For residential properties, real estate notes can be divided into the following:


Performing Notes

These are notes where the borrowers are meeting up with their scheduled payments, so they are on time. They are generally sold by banks and have been changed from their original terms. As an investor with a performing note, your primary focus is on the gain you receive per payment.

Non-Performing Notes

These are notes that are sold by banks at significant discounts. Here, the borrowers aren’t meeting up with the scheduled payments, so they are not paying. It may be due to health challenges, unemployment, or other factors. You can modify the payment plan to suit the borrower or foreclose the property if needed. Meanwhile, the returns can be higher and could be risky as well.

What Are The Advantages of Investing In Mortgage Notes?

1. No Management Of The Property

One of the reasons why many investors choose mortgage notes it’s because it saves the stress that comes from being a landlord. In this case, you only receive the income without the headaches of being the landlord.

2. No Issues Concerning Maintenance

As the homeowner, if anything should break, you will be the one to fix it. However, as a lender, all maintenance is the responsibility of the homeowner, so no maintenance for you!

3. Lien Is Secured By Real Estate

In clear words: with mortgage notes, you have the right to foreclose or take back your property if the borrowers suddenly stop paying their mortgage.

4. You Buy The Property At a Discount Rate

This is the greatest advantage of investing in mortgage notes. Because banks cannot handle these notes, they make offers to investors at a discount. Depending on the property, these discounts can be between 50-90%. As a lender, this will increase your ROI (return of investment) and also secure your capital.

If you want to know how to successfully invest in mortgage notes contact Melanin Homes

To discuss other ways to invest in real estate BOOK A CALL NOW,
Akin Developers team will help you figure out the best options for your investment needs.

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