Buying mortgage notes

How mortgage note investing works

Updated 2026-10-19

Note investing means buying the right to collect payments on a loan, usually one secured by real estate. The investor pays less than the remaining payments are worth in total, and earns a return as the borrower pays. The main risks are the borrower stopping payment, the property being worth less than expected, and paperwork problems.

What you're actually buying

When you buy a note, you become the lender. You don't own the property. You own the borrower's promise to pay and, if the note is secured, the right to enforce the lien if they don't. Payments that used to go to the original lender now come to you.

Where the return comes from

The return is the gap between what you pay for the note and what you collect over time. A note with $80,000 of remaining payments might trade for less than that because of the time value of money and the risk involved. The lower the price relative to the payments, the higher the yield, if the borrower keeps paying. Our pricing guide shows the math.

Two broad strategies

Performing notes: the borrower is paying. You're buying a payment stream, and the work is mostly checking the borrower, the property and the paperwork.
Non-performing notes: the borrower has stopped paying. You buy at a much deeper discount and then work out a solution: a new payment plan, a loan modification, a deed in lieu, or foreclosure. It's higher-effort and higher-risk. See performing vs. non-performing notes.

The main risks

Default. Payments stop, and recovering through foreclosure can take months or years depending on the state.
Collateral value. The property may be worth less than you thought, or be in poor condition.
Title and paperwork. Missing assignments, a broken chain of endorsements, or senior liens you didn't know about.
Regulation. Servicing and collecting on residential loans is regulated. Many investors use a licensed loan servicer.
Liquidity. Notes aren't as easy to resell as stocks.

Questions investors usually ask first

Is it a first or second lien?
What's the property worth today, and what's the balance?
What does the payment history look like?
Is the chain of title and assignments complete?
Who will service the loan?

Questions

Do I need a license to buy notes?

Buying notes as an investment generally doesn't require a license, but servicing or collecting on residential loans, or making new loans, can be regulated depending on the state. Many investors hire a licensed servicer. Check your state's rules with an attorney.

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Educational information only, not legal, tax or investment advice. Laws and practices vary by state and situation, so talk to a qualified professional about yours. CashForMyNote.com does not buy notes. Affiliate disclosure.