Mortgage Note Investing Yield Calculator
Mortgage note investors buy existing loans at a discount and collect the payments. A performing $100K note with 5% remaining might sell for $80K — yielding 8-12% to the buyer. Non-performing notes sell for 30-60% of face value with higher upside if worked out.
How Note Investing Works
Mortgage note investors buy existing loans from banks, sellers, or other investors. The seller wants liquidity now; the buyer wants the long-term yield. Notes trade at discount to face value because of credit risk, time value, and lack of liquidity. Performing notes (current on payments) trade at 70-90% of face. Non-performing notes (in default) trade at 30-60% of face.
Performing vs Non-Performing
Performing notes provide steady cash flow at 8-12% yields. Lower risk but lower upside. Non-performing notes require workout skills: loan modification, deed-in-lieu of foreclosure, or foreclosure to gain the property. Buyers who can execute workouts achieve 15-30%+ IRR but face significant operational complexity.
Due Diligence Checklist
Verify chain of title to confirm seller actually owns the note. Confirm lien position — first lien notes are far safer than second/junior. Get current payoff statement and last 12 months of payment history. Check the underlying property: BPO (broker price opinion) or appraisal. Verify servicing is in place — without a servicer, you collect payments yourself.
Source: American Mortgage Investors Group industry data, RealtyMogul note investing primer, NoteSchool training materials. Last updated: May 2026.