A mortgage note (or real estate lien note) is a promissory note associated with a specified mortgage loan.

A mortgage note is a written promise to repay a specified sum of money plus interest at a specified rate and length of time to fulfill the promise.  Selling property on real estate notes is common in the United States.  In some states they are called Land Contracts, Trust Deeds, Contracts for Deed, Deeds of Trust, or Private Mortgages, but they all represent the same thing: a way of selling property where the Purchaser “borrows” from the Seller rather than paying cash up front or borrowing from a bank.

While the mortgage itself pledges the title to real property as security for a loan, the mortgage note states the amount of debt and the rate of interest, and obligates the borrower, who signs the note, personally responsible for repayment.  In foreclosure proceedings in certain jurisdictions, borrowers may require the foreclosing party to produce the note as evidence that they are the true owners of the debt.


Mortgage Note buyers are companies or investors with the capital to purchase a mortgage note.  If someone is holding a private mortgage, these investors will give cash and take over receiving the monthly payments that were being paid to the previous owner.  A Mortgage Note for these investors are home loans or mortgages that are secured by real estate. Mortgage notes could be anything from $10,000 to tens of millions of dollars.

Comparison to other investments

The advantage of a Mortgage note over a Tax lien or Tax deed Certificate is that a Mortgage note will allow one to collect the interest on a monthly basis.  Tax lien and Tax deed certificates are only paid when the Lien or Deed is redeemed.

What determines a mortgage type?

For the most part, it is the mortgage note which determines the “type” of mortgage:

  • If the note has a fixed interest rate and payments, then the loan is a Fixed Rate Mortgage (FRM) loan.
  • A fixed interest rate with adjusting payments is a Graduated Payment Mortgage (GPM).
  • A floating interest rate and payment amount indicates an Adjustable Rate Mortgage (ARM).
  • An amortization schedule longer than the maturity date indicates a balloon payment mortgage.
  • When the payment schedule calls only for interest and no principal, thus leaving behind the full principal due at maturity, the loan is an interest only loan.
  • A payment adjustment frequency less than the interest rate adjustment frequency implies a mortgage which allows for negative amortization.
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