What is Note Seasoning?

“Seasoning” is the term used to describe the amount of time the payer has been making payments. The general rule of thumb is the longer the better, with 12 months or more optimal. That is not to say that a note won’t be sold unless there is a lot of seasoning. It just means the investor will be looking at other variables of the deal that minimize risk.

For example, three years of making timely payments represents a much better track record than only two payments made so far. 

It is also helpful if the payments can be verified. When payments are collected by a third party, they are considered outside serviced with a verifiable payment history. Sellers collecting payments directly can provide verification by keeping a copy of the check or money order received from the buyer along with the deposit slip received from the bank. 

In dealing with a note without significant seasoning, an investor will look for a better credit rating, better ITV, or more equity in the property.  

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