Real Estate and Note Investors Network

Can I Sell My Promissory Note

A note that is secured means that the borrower has agreed to surrender their property as collateral if they fail to pay back the principal loan. This means that if you have lent money through a secured note, you have the legal right to take their property. This property can be either tangible (jewelry, cars, computers, etc.) or intangible (business, stocks, copyrights, patents, etc.).

Each state regulates whether notes are transferable so be sure to consult your local laws and include the precise language needed (i.e. the note is made “payable to order” or “payable to the bearer”).

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Sell My Mortgage Note

A note does not guarantee that the lender will be repaid, but a written note will be strong evidence if you need to appear before a judge. If the borrower is unable to pay back the money and defaults on the note, the lender can place the note for collection. The borrower would be responsible for paying any reasonable costs associated with collection, including attorneys’ fees.

Steps To Selling My Note

There may be situations where you want to clearly document whether the money being given should be treated as a gift or loan for accounting or tax purposes. For instance, the IRS allows you to give a gift of $14,000 to each of your very lucky family members for the year of 2015 without incurring gift tax consequences (i.e. annual gift tax exemption). Every year, for example, your grandparents could give a combined $28,000 to each of their grandchildren per year in an effort to reduce their estate taxes.

The collateral is any asset that is worth the equivalent or more of the loan. It is optional to have the note require collateral from the borrower. Collateral acts as a type of protection for the lender in case the borrower defaults or fails to pay back the loan.

With an installment payment option (“Installment Payments”), the borrower repays the lender in a set number of installments over a set period of time as specified in the document. “Installment Payment with a Final Balloon Payment” is the same (repaying the loan in periodic installments), with the addition of one large “balloon” payment to be paid on the final due date.

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How To Sell My Mortgage Note

A Promissory Note is a legal document that sets out the details of a loan made between two people, a borrower and a lender. The note clearly outlines the borrower’s promise to fully repay the lender within a specified amount of time. It includes all the terms and conditions of the loan transaction and ensures the parties have a thorough and complete written record of the deal and their intentions. As such, the note should be finalized before any money changes hands. The document also acts as a formal record of the transaction.

A professional collection agency will charge the lender either a flat fee or a percentage of the outstanding debt, so it can sometimes be in the lender’s interest to negotiate a debt settlement agreement with the borrower and accept less than the original amount owed.

Sell My Note – Should I?

When there is a conversation and negotiation between the buyer and the seller for a property, a promissory note is prepared. These notes enlist the details of settlement that has happened between both the parties. Information about the asset, price, interest, the address etc. is mentioned in the legal paper.

Prepayment is an option for the borrower to repay the loan, at any time earlier than the due date. The Borrower has the right to prepay all or any part of the loan at any time and without penalty. However, the Lender may require the Borrower to first provide written notice.

If you have already maxed out your giving (i.e. the annual gift tax exemption of $14,000 per person per year), you can help a family member in need by turning to the de facto “family bank” and using a promissory note. An intra-family personal loan, however, is subject to the minimum IRS Applicable Federal Rates (“AFR rates”), which are published monthly. Fortunately, the IRS required AFR interest rates are often below commercial mortgage rates, and all the interest and principal payments stay within the family. For comparison, consult the survey results of business lending terms released by the Federal Reserve in April 2016 or the average loan rates as of June 2016 developed by economists at the Research Division of the Federal Reserve Bank of St. Louis.


Can I Sell My Mortgage Note

In case the borrower defaults and cannot pay back the amount in full, the cosigner is responsible for paying back the lender for the amount due. The cosigner is usually someone in good financial standing or has excellent credit.

Imagine Betty borrows $100,000 from Larry to start her very own 3D printing studio. The note requires Betty to pay Larry $1,500 every month ($500 goes towards an annual 6% interest rate and $1000 goes towards the principal) for 100 months until the balance is paid off. After 20 months of Betty diligently repaying, Larry actually would prefer to get his money back sooner so he can invest in an exciting dog walking business.


As you can guess, the IRS is trying to distinguish between a genuine loan between family members and a gift

from one family member to another disguised as a loan. In order to satisfy the stringent IRS guidelines, intra-family loans should be clearly documented with formalities like a note. A March 2015 article by Investment News explains how this document can help families transfer wealth through more sophisticated intra-family loans.

Possibly, you might find someone who gives you the right recommendation to sell the note, i.e. right time, the right amount, the right authority to whom the note should be sold. For that you can either sell the promissory note to a bank or there is option to sell them to authorities that are into this business.

A cosigner or guarantor is optional and protects the lender in case the borrower defaults. The lender may require a cosigner if the borrower is in questionable financial standing. The cosigner is someone who jointly signs the agreement with the borrower.



Another distinctive feature is that they can be transferred or treated as  a “negotiable instrument.” If state requirements are properly satisfied, a note can be transferable or be exchanged between different parties, serving as a substitute for money.

The lender must indicate the amount of the note (called the principal), the interest rate, and the repayment method and schedule that the borrower will use to repay the loan amount. It is also best to include any additional stipulations, such as prepayment or default of the loan.

If you’re new to loans and finance, you may be confused about the differences between these different loan arrangements. We highly recommend reading our comprehensive guide describing the differences in detail here.

The borrower or lender can be either an individual (person) or an entity (company). Examples of an entity include a corporation, LLC, or partnership. In the case where either the borrower or lender is an entity, a representative must sign on the entity’s behalf.

Similarly, borrowers with less-than-stellar credit benefit from non-traditional lending instruments like a note. Although unable to qualify for a traditional mortgage or line of credit from the bank, a borrower can use this document to slowly get on back on the path of good credit, own a car, become a homeowner, or start a business.

If you are unsure of how much interest rate to charge on a personal loan, visit the Wells Fargo Rate and Payment Calculator, the Prosper Loans, or the Lending Club’s rates for a comparison of current interest rates for personal loans. Amortization calculators are also available if you want to calculate the breakdown of principal and interest payments on a monthly basis for the lifetime of the loan.

If the loan will be repaid at one time, it can be repaid either on a specified due date or “on demand” by the lender. With a “Due on Demand” payment option, the borrower repays the lender upon the request and at the demand of the lender.

At any point of time if the seller wishes to get complete cash for the property, he has right to sell the promissory note to the party that buys it (banks or any other authority). For the first time, you might not know as how to proceed for it and thus you enquire from different people that I want to sell my promissory note, any idea how can I do that? Seeking the advice and getting the right one, there is a difference between both of them.

Instead of simply waiting for the maturity date of the note to arrive, Larry could sell his note for the remaining balance ($80,000 in principal plus $40,000 in interest payments yet to come) at a discount (maybe $90,000) to his friend Lisa who is happy to patiently accept Betty’s $1,500 monthly payments for the next 80 months (and make $30,000).[/tip]