Is there a difference between a Promissory note and a Mortgage?

by Nationwide Secured Capital

Promissory notes and mortgage notes, these two terms have been thrown around for years, sometimes even used interchangeably.  This is especially true when it comes to buying a house.   Is there a difference between a mortgage note and a promissory note?  If so, do you know what it is and does it matter?

Yes, there is a difference between a mortgage and a promissory note.  The mortgage, also known as a deed of trust, is the document that provides the security for the loan.  The promissory note is the actual binding document with the promise to pay back the loan. Each document should contain some items to be considered a promissory note or a mortgage.

The promissory note must include the name of the borrower, the address of the property (if applicable), the interest rate, either fixed or adjustable, the amount of the loan, the term or number of years of the loan, and a late charge amount.  It will include both the lender’s and borrowers rights and responsibilities.  This document is not recorded in the county land records.  Think of this like the pink slip when selling a car. The lender is the one who holds the promissory note during the time the loan is outstanding. When the loan is fully paid off, the note is then given to the borrower like a pink slip is given to the fully paid off owner of a car. Promissory notes can be used for a variety of loans such as commercial loans, student loans, bank loans, and real estate loans.  It does not have to be tied to a physical piece of property.

The mortgage note, or deed of trusts’ purpose is to provide security for the loan.  It must include the name of the borrower, the address of the property, and the legal description of the property. It will also contain a clause that will allow the lender to demand the entire balance of the loan should the borrower default on loan.  This is called an Acceleration Clause. If the borrower continues to default on the loan, the lender can begin foreclosure proceedings, and the real property can be sold to satisfy the debt.  Unlike the promissory note, the mortgage note is recorded in the county land records after the borrower has signed it.  When the loan is paid off, the lender will record that the loan has been satisfied with the county land records.

When purchasing a home, the borrower will actually be signing two separate documents, the promissory note and the deed of trust.

Promissory notes are a negotiable instrument that can be transferred or sold and endorsed (signed over), to a new owner. When the new owner of a note first attempts to collect on the note, a letter should be sent to the borrower asking for repayment.  This should include a copy of the promissory note.

When unsure about what one is dealing with, promissory note or mortgage note, it is always best to consult with a professional.

15 Keys to Increasing the Value of the Mortgage Note

by Nationwide Secured Capital

Although I have been in the business of buying mortgages for over 20 years, there are some questions that are more commonly asked than others. One of the most notable is, what are some of the essential keys to increasing the value of my mortgage note? In response to this question, I have compiled the following list that features 15 things that will assist you as the seller with doing just that.

1. You must have High Credit Score

2. Down payment at the time of closing must equal or exceed the present market equity in the property. This is because the amount of the payment will affect the actual value of the loan.

3. You must have a good payment history (past 12 months).

4. Your seasoning of the mortgage note is important. For instance, the more payments received since its origination will make the mortgage more valuable.

5. Certain geographical Location affects the value, makes it more or less saleable.

6. Appraisal value of the mortgage holder’s property.

7. Curb Appeal

8. Interest rates affects value. In general, the higher the rate the better.

9. Length of terms. Generally, if the person has lesser time to pay, they will receive more money in the sale.

10. Depending on the situation, balloon payments can affect the loan negatively. Which means, if the payer cannot meet the terms of the loan payment, it decrease its value instead of impacting it positively.

11. Good Record keeping. Person must keep good records of payments including deposits, cancelled checks of payments and the like.

12. Note amount. Typically, buyers are looking for an amount that ranges from $50,000 to $500,000.

13. Property Type. The type of property makes a significance difference. Buyers lean more toward single family and owner occupied dwellings.

14. Documentation Type. As new regulations take effect, the document type has become more important over time.

15. Seller must be willing to share relevant data with the seller. The value of the mortgage increases when the seller makes all relevant information readily available to the buyer so that they can make an informed decision (i.e. promissory note, payment records, settlement statements, old title policies, declaration page of home owners insurance, and anything else that can assist them with making a decision to buy).
With this being said, when you review this list, you may want to start by choosing at least 5 Factors That Can Make Your Mortgage Note More Valuable. By focusing on ensuring the first 5 factors meet these criterion, you can make sure that all 15 keys are strategically taken care of within a specified period of tim0

6 Things to Look for in Mortgage Note Buyers

by Nationwide Secured Capital

When a seller of a property has chosen owner financing to supplement their income and avoid the traditional selling of property via banking institutions, sometimes they find it time to sell their mortgage note and receive cash in full. This is where note investors or note buyers will step in on the open market and buy your note from you, essentially taking over your future payments from buyers in return for giving you a lump sum of cash. This releases you as the owner financier and frees you from the property while cashing in on your asset.
Have you felt overwhelmed at the prospect of finding and selecting the right mortgage note buyer? It seems like there are so many willing to buy, but the myriad of options to choose from do not make it easy to choose the fairest and most experienced mortgage note buyers.
Below is a handy guide of 6 things to look for in mortgage note buyers. This will help you narrow down your search of potential note buyers and give you a better start, and more confidence, in selling your note at a price that is fair to you.

1. Experience in the Industry

When selling your mortgage note, you certainly do not want to start off with a new buyer/investor. There are a number of reasons for this. Some novice note buyers are posers who pretend to be investors, but they rarely, if ever, fund a deal themselves. This ends up in a chain of note brokers that can make it difficult to close the deal. Deal DIRECTLY with a note buyer, and not through those who put up a buyers’ façade in order to broker notes to other buyers.
This is why it is important to deal directly with a note buyer who has verifiable experience in the industry. Experienced note buyers understand the process, can answer your questions honestly and will provide a higher-quality service to you during the process.

2. Strong Reputation

A strong reputation is crucial to choosing a note buyer. While dozens of note buyers can be experienced in years, it is the quality of that experience with customers that dictates reputation. Independent testimonials, ratings, or references are all excellent ways of establishing a note buyer’s reputation in the note buying market. A trustworthy buyer can answer your questions honestly (rather than trying to fool you) and work professionally.

3. Response Time to Your Requests

When putting out feelers to different note buyers, take notice of how long it takes for them to respond to your requests for quotes or questions, and the quality of those responses. If a buyer is really a professional and cares about their customers, then they will get back with you quickly in order to get your business. A smart note buyer understands how fluid the market is and how quickly a note can be sold—if they do not respond quickly to your request, they are losing out on a fleeting opportunity to buy a note from you—if a buyer fails to recognize this, then they are not a very good buyer and not one you should work with. A good note buyer has dedication, is a quick responder for your business, and knows that most sellers are looking at multiple buyers and they will want to stand out from the crowd and impress you.

4. Individual Note Pricing

As stated before, it is important to observe potential note buyers and how they behave. Avoid the ones that do not care for you as a customer, because they simply want their money and are not likely to be the type of person to be honest, fair, or professional. A good note buyer will attend to your needs, as they know they have a reputation to keep and you may act as a reference or customer again in the future.
This means that giving you an individual and unique quote is an important part of separating the good eggs from the bad eggs. If a buyer sends you a generic number that they offer everyone as an umbrella price, then ditch them. If they do not have the time or dedication to take a look at your property information and give a quote that is unique to you and your property, then they do not have the time nor willingness to do further business with you regarding your asset.
If they cannot give you a personalized quote, then why on Earth would you give them your money?

5. Willing to Pay Fees Without Hidden Costs

Great note buyers with stellar reputations, professionalism, and a thriving business do not make it a habit of hiding hidden fees to their customers. This gives them a bad reputation, bad references, and makes them lose customers. A great note buyer will not need or wish to rip you off due to some hidden fees and costs. This is simply not worth blowing the deal to them, to hide a few bucks from you.
A company that is upfront with their fees and costs are the ones you want to use. The others that do not offer this information but claim to have a higher payout or cheaper cost, is likely hiding something from you. You do not want to get involved in that.
In fact, good note buyers will pay all of the fees involved themselves rather than charge you, with any normal note transaction. This helps you feel at ease, as you are without risk, and can focus on the main deal with the note buyer.

6. Investor Type

Institutional (National) Investor/Buyer or Private (Regional) Investor/Buyer is a question you must ask yourself when first seeking out a note buyer.
Institutional Buyers will purchase notes on a national scale and are often the “big boys” of the note buying industry with the ability and cash to write you a check at closing.
The other type of investor are the private or regional buyers. This type of buyer purchases notes on smaller scales, usually in their geographic region. It is more difficult to track down this type of buyer, but with the internet, a little bit of searching and researching can find you the best ones in your area.
But first, you must ascertain using the above tips, whether they are able and equipped to service a note, close the deal, and underwrite. Their capabilities and reputations must be researched by you for you to be completely comfortable with using this type of investor.

Conclusion

It is best at the end of the day, to begin your search using the tips above and always trust your gut and logic when it comes to trusting the people you will be working with. It will be up to you to decide which note buyer you will choose, and you will want to make sure that it is the best buyer for you.