A Few Strategies for Buying Mortgage Notes

by Apr 7, 2022


If you’re looking for other ways to invest in the real estate market in New York other than buying property, you may have already heard about buying mortgage notes in New York. Buying mortgage notes in New York is a great opportunity to profit off real estate without assuming any of the responsibility of maintaining a home or property while also not having to put up as much money as it would take to purchase a new house.

There are different ways you can make money off of mortgage notes but to understand those strategies, we have to review first the different kinds of mortgage notes in New York.

What are different kinds of mortgaging notes?

If you’re not yet familiar, NY mortgage notes are promissory notes, which is a borrower’s written promise to maintain lender repayment. These are legal documents that outline a borrower’s responsibility to pay back a loan that they got. There are many different kinds of mortgage notes and are categorized by loan type, loan provider, lien position, performance, and asset class.

For our purposes, the most important thing to look at is performance. Performing loans are ones that are being paid on time as specified by the note, under-performing notes have a borrower with a history of being periodically late with payments, while non-performing notes is 90 days or more past due. Meanwhile, a re-performing note is when a borrower has missed payments but has since gotten back on track. Sometimes these loans have been modified by either extending amortization, principal reduction, or interest rate reduction.

For the other categories, generally we’ll be looking for a secured loan type so that we know the loan is backed by a tangible. For the lien position, we want to focus on notes with “first position” or as close to top priority as possible. As an investor you’re free to choose whichever asset class is the most profitable option available at the moment, while the loan provider won’t be to important as you will simply assume their responsibility once you purchase the note.

New York mortgage note strategy

When investing in mortgage notes in NY, there are several ways you can do this successfully. The most obvious route is buying performing notes at a discount and enjoy the passive income that comes with it. But these opportunities aren’t always available so we resort to other methods.

Since non-performing notes are usually more available, it’s a good idea to buy these at a discount and work to turn them into a performing note. To improve the performance of these notes, you as the new lender can work with the borrower and find a solution to help them get back on track with their payments. When they get back on their feet and catch up, you can either hold on to it – if the revised terms are still profitable for you or sell this as a preforming note at a margin.

Another strategy that some take is to look for mortgage notes with an attractive property attached to it. They then do a “loan-to-own” strategy and exercise the power to foreclose and take possession of the real estate. Instead of a passive flow of income, mortgage notes then become an effective way for you to secure real estate without having to

Where can you buy mortgage notes in New York?

Finding mortgage notes in New York isn’t that hard when you know where to look. Depending on your business strategy and experience where you get your notes. You can build a network of lenders or get it from a variety of sources such as:

  • Note exchanges or marketplaces
  • Private note holders – usually seller-financed property or business sales
  • Banks and credit unions
  • Hedge or private equity funds that buy in bulk from banks and servicers and then resell

You can also opt to buy mortgage notes for sale online or through companies that specialize in it like Melanin Homes. Companies like Melanin Homes take the work of looking high and low for the best investment opportunities and presents them to you, based on your criteria. Contact Melanin Homes today and learn how you can Start your investment journey in mortgage notes today!

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