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Selling mortgage notes: How to Turn Your Note into Liquid Assets

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Selling Mortgage Notes: A Comprehensive Guide | Debexpert
Key takeaways:
Selling mortgage notes provides a way for note holders to convert their long-term income streams into immediate cash. By transacting with reputable buyers, one can efficiently turn their note into a liquid asset, enhancing financial flexibility and capital availability.

In the world of real estate and mortgage financing, selling mortgage notes has become a popular strategy for immediate liquidity and risk mitigation. This comprehensive guide will help you understand the process and benefits of selling your mortgage note, whether it's a private mortgage note, real estate mortgage note, or a seller-financed mortgage note. We'll also cover the crucial aspects of buying and selling mortgage notes, including how to buy and sell mortgage notes, mortgage note selling, and working with a mortgage note seller.

Reasons to Sell Your Mortgage Note

You might be contemplating, "Should I sell my mortgage note?" or "Can I sell my mortgage note?" Here are some reasons to consider selling your mortgage note:

  1. Access to immediate funds: Selling mortgage notes for cash allows you to use the proceeds for other investments or business opportunities.
  2. Reduced risk exposure: Selling your mortgage note can help you mitigate the risk of borrower default, particularly when selling a mortgage note that is in default.
  3. Portfolio diversification: By selling mortgage notes online or offline, you can diversify your investment portfolio and achieve a better balance between risk and reward.
  4. Property management relief: Selling a private mortgage note in FL, PA, or any other state means transferring the responsibility of managing the property to the new mortgage note holder.
  5. Flexibility in selling a portion of the mortgage note: You can sell a portion of your mortgage note to access funds while retaining the remaining cash flow.

Steps to Sell Your Mortgage Note

If you're wondering, "How to sell a mortgage note?" or "How to sell your mortgage note?", follow these steps:

  1. Organize all relevant documentation: Gather all the necessary documents, including the mortgage note, deed of trust, closing statements, and payment history.
  2. Evaluate your mortgage note: Assess factors such as payment history, loan-to-value ratio, borrower's creditworthiness, remaining term, and interest rate to determine the value of your mortgage note. Consider the potential discount when selling a mortgage note and calculate the cash basis for selling the note.
  3. Find a reliable mortgage note buyer: Seek recommendations from your professional network to find trustworthy mortgage note buyers. Some popular options include mortgage note investors, banks selling mortgage notes, and online platforms for selling mortgage notes.
  4. Negotiate the terms of sale: Engage with potential buyers to negotiate the sale's terms and conditions, including the purchase price, payment method, and closing process.
  5. Complete the transaction: Transfer the mortgage note to the buyer, sign any necessary paperwork, and receive payment.

Tips for Buying and Selling Mortgage Notes

  1. Understand the market: Research market conditions, trends, and best practices in mortgage note buying and selling.
  2. Network with industry professionals: Connect with mortgage brokers, real estate agents, and other professionals to stay informed about opportunities for buying and selling mortgage notes.
  3. Find reputable buyers and sellers: Work with trustworthy buyers and sellers to ensure smooth transactions and minimize risk. Verify their licensing and regulatory compliance.
  4. Conduct thorough due diligence: Verify the accuracy and completeness of all documentation, including title searches and credit checks.
  5. Monitor market trends: Stay up-to-date with market developments and adjust your buying and selling strategies accordingly.

Types of Mortgage Notes to Sell

  1. Private mortgage notes: These are notes created through seller financing transactions between private parties.
  2. Real estate mortgage notes: Mortgage notes secured by real estate properties, such as residential or commercial properties.
  3. Seller-financed mortgage notes: Mortgage notes created when the property seller provides financing to the buyer.
  4. Performing, non-performing, and re-performing notes: Mortgage notes are categorized based on the borrower's payment history, with performing notes being the most desirable and non-performing notes carrying the

highest risk.

  1. Residential and commercial mortgage notes: Residential mortgage notes are secured by single-family homes or multi-family residences, while commercial mortgage notes are backed by commercial properties.
  2. First and second mortgage notes: First mortgage notes have priority in the event of a foreclosure, while second mortgage notes carry a higher risk due to their subordinate position.
  3. Owner-financed mortgage notes: Mortgage notes created when the property owner finances the purchase for the buyer.
  4. Partial mortgage notes: Selling only a portion of your mortgage note can provide you with immediate cash flow while retaining a portion of the note's future payments.

The Legal Aspects of Selling Mortgage Notes

  1. Compliance with state and federal regulations: Ensure that the sale of your mortgage note complies with all applicable state and federal regulations, including the Dodd-Frank Act and the Consumer Financial Protection Bureau (CFPB) rules.
  2. Transfer of ownership: Ensure that the transfer of ownership is properly documented, and that the mortgage note is legally enforceable in the new owner's hands.
  3. Tax implications: Consult with a tax professional to understand the tax implications of selling your mortgage note, particularly if you're selling a private mortgage note in default.
  4. Seller-prepared deed, note, and mortgage: Work with a real estate attorney or title company to draft and execute the necessary documents for the sale of your mortgage note.


Selling mortgage notes, including those associated with a second lien, can be a strategic move for immediate cash flow, risk mitigation, and portfolio diversification. If you're considering selling your mortgage note, whether it's a primary or second lien, ensure that you understand the process, legal requirements, and market conditions. Engage with reputable mortgage note buyers and seek professional advice to maximize the benefits and minimize the risks associated with selling your mortgage note.

Whether you're selling private mortgage notes, real estate mortgage notes, or exploring the world of buying and selling notes mortgages, this comprehensive guide provides you with the knowledge and tools needed to navigate the mortgage note market successfully.

Written by
Carlos Aispuro
Lender Relationship Director

With thirty years of experience in banking, debt collections, compliance, audit, and governance, I have supported strategic plans and improved customer experiences. I possess hands-on knowledge in crucial C-Suite areas, including developing new policies and procedures, optimizing their models, and exploring new tools to help institutions achieve their goals more effectively.

  • Banking, debt collections, compliance, audit, and governance expert
  • Crucial C-Suite areas expert



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