How Note Buyers Can Accelerate Return

Holding or buying mortgage notes and want a quick way to accelerate your return?

Sure, you can’t go back to your payer/buyer and tell them to mail more money or even increase their interest rate.

Matter of fact, you purchased the note “subject to” all the terms and conditions already in place and can’t change a thing…unless the payer wants to change them!

Try this…

Offer the payer to cut the interest rate in half (face rate of the note)

if they double their payment!

Let’s say the original note is:

  • 240 months at 8% on a $50,000 balance with payments of $418.22
  • You buy the discounted note for $40,000, which gives you a yield of 11.20%

Not bad. But what if the buyer doubles their payments to $836.44 and you cut their rate to 4%?

  • First off the buyer pays off sooner….way sooner. In this case instead of 240 months, the buyer pays off in 67. That is a pretty good incentive for the payer.
  • They also save big on their overall interest payment for the life of the note (about $44,518.00)

But, what about the note investor?

  • The return goes UP to 12.70% (67 payments, $40K invested, payments of $836.44)

This truly is a win-win for both the payer and the note buyer. Not only did it bump up your return, you now have full use of the money to reinvest in just over five years instead of twenty! This is just one of many strategies available when calculating cash flow notes!


  1. does the payer ever build equity i have heard yes an no ?

    • Hello Daniel,

      Yes, the payer usually builds equity. This can happen in several ways:

      1. The initial down payment

      2. Through regular amortization where part of the monthly payment goes to interest and the balance pays down the unpaid principal balance (although this is not the case on an interest only note).

      3. The property appreciates increasing the fair market value.

      4. The buyer makes improvements to the property that increases the value.

      These items relate to equity wherein the property value is greater than the amount owed on the property. There is also something called equitable interest that relates to real estate contracts. Equitable interest is a legal term versus equity which is a financial term.

      Most note buyers prefer investing in notes where the buyer is building equity. The more equity the buyer builds the less likelihood there is they will stop making payments.

  2. Thanks for the good advice! Our business is all about creating a win-win for both the buyer and seller. And the more options we have means more deals closed!.Thanks again.


  1. […] have written before about how note buyers accelerate payments on cash flow notes. One such strategy was the Double Your Payment/Cut The Interest Rate in […]

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