Promissory Note

Holding a Promissory Note and want to liquidate it? Mortgage Note Buyers of America can buy your note quick and easy. Everyone at some point in their life will have an unexpected event occur that requires cash and selling a promissory note is an excellent option to raise the necessary funds. If you are collecting monthly payments on a promissory note and need your funds liquid, we can help. To acquire an offer for your promissory note, you can place an online submission by going to this link and complete the submission form or call (800) 494-0899 to speak directly with an investor. We look forward to assisting you.


Factors that determine the offer amount for your promissory note

Once we have all the relevant information from your promissory note, it will be evaluated by an underwriter to determine if it meets our investing criteria. The question all note sellers have is “how much will I receive? or “how big is your discount?”. It will depend on the quality of the following factors.

  • Quality of the borrower—payment history, credit history, financial strength
  • Quality of the collateral security—land, buildings, furniture fixtures and equipment
  • Equity amount borrower holds—current balance divided by property value
  • Duration of the note—6 months, 60 months (5 yr.), 120 months (10 yr.)
  • Terms of the loan—amortizing, balloon, monthly payments, annual payments
  • Cash-flow Income —monthly, annually, upon repayment in full
  • Default Provisions—what happens if the borrower does not, or cannot pay
  • Liquidity—if the investor needs cash in a hurry, can the note be sold easily
  • Interest rate—how does it compare to other investments having comparable terms and comparable risk


Evaluating these factors helps us determine the risk of purchasing your promissory note so a discount is really an adjusting mechanism that reflects the risks associated with the promissory note; big risk, big discount and vis versa.


One other factor that needs its own explanation is liquidity. Since promissory notes are not traded on an exchange they are considered “illiquid”—not quickly and easily sold for their unpaid balance. A more familiar example of an illiquid asset is a bank CD. If you own a Certificate of Deposit and you decide to cash it in before it matures, the bank will discount the balance so you will not receive the full amount.


Selling a promissory note is a competitive process

Investors have many investment opportunities available to them - stocks, bonds, annuities, mutual funds, exchange traded funds, real estate investment funds, municipal bonds, land, apartments, commercial real estate, mortgage pools as well as individual promissory notes. Therefore, when you sell a promissory note all of the above investment products are competing for investors’ dollars.


Since no two investment products are alike and typically differ substantially from each other there has to be a comparison mechanism. The measuring stick used to compare one investment product with another goes by several names —the “yield”, the “rate of return”, the “interest rate”, the “cash flow” or the “income”. Because the terms of a promissory note cannot be changed without the consent of all parties, the one variable that makes the entire process of changing a yield on a promissory note possible thereby making it more attractive to investors is the discount. And this is how investors make differing financial assets comparable or similarly attractive so consider the current balance minus the discount as the price the investor will pay for your promissory note.


Assume a note has a $10,000.00 balance and has a 6% interest rate printed on its face. The monthly interest only payment will be $50.00. If the investor is satisfied with the quality of the note, the borrower, and the 6% yield you will receive $10,000.00—par value. No discount is necessary to satisfy the investor.

If the investor is not comfortable with the 6% yield and wants 12%, you will receive $5,000.00—a fifty-percent discount to satisfy the investor. If the investor is not comfortable with the 6% yield and wants 9%, you will receive $6,666.67—a thirty-three and one-third percent discount to satisfy the investor.


The discounting of a promissory note adjusts the yield of the note to the buyer to reflect the risks associated with the note.