(954) 606-9010

Everything you need to know about mortgage notes!

Share Button

There are various efficiently risk geared and easy methods for real estate investors to access cash with the help of tax-advantaged IRAs, and indeed, mortgage-backed notes or deeds of trust, are the most popular, widely used and most reliable of all these methods. If you want to step into the real estate investment business, or even buy a modest house for yourself, mortgage notes is the most effective and facilitating strategy as compared to investing directly.

In financial terms, a mortgage note is a legally binding document, where the borrower is given a loan that has to be repaid, given a certain rate of interest, within a specified period of time. Your deed of trust or mortgage note secure and confirms the validity of this agreement.

The IRA will play an important role by acting as your bank, and loaning the money to you. A deed of trust or mortgage note will be issued, stating the location or county of your property.

Your mortgage terms may require you to pay back just the principal amount, while others may require you to pay a specified amount of interest as well, depending on the terms of your mortgage notes. So basically, you will be required to pay back to the IRA every month until you have returned the entire amount of your loan, reconvening the requirements of your agreement terms. Once the loan has been repaid, you will become a homeowner, by attaining the right of unquestionable property ownership.

So, what are all the legal documents that you need for a mortgage note?

Along with the mortgage note, you will require the following financial documents at the closing:

  • HUD-1 Settlement Statement
  • Truth-In-Lending Statement
  • Mortgage/Deed of Trust
  • Monthly Payment Letter

What terms will the mortgage note dictate?

Your mortgage note is the most vital of all documents that you will need at the closing, and it will contain essential terms such as:

  • Loan amount
  • Interest rate
  • Due dates
  • Late payment penalties
  • Terms and conditions of your mortgage.


What purpose does the recorded mortgage note or deed of trust serve?

The mortgage note is a legal record that is security for the payment given by the IRA, your mortgage holder. If you end up defaulting payments, the IRA will have the right to issue a claim against the property you have invested in, and take control of it.

In the instance you fail to make your repayments, the IRA will take over your property in return of the loan that was given to you.

Nothing to despair, because you will be made an IRA account owner, and that gives you the right to rent out or even sell your property and pay back the loan.

So, how does the mortgage note process work?

In legal and financial terms, the paperwork and application process of a mortgage note is much like that of using the IRA to directly invest in real estate.

You begin by hiring the services of a real estate broker or a title company, and they will make sure you are provided with all the necessary paperwork and forms required for a strong application.

Once your application is completed, you will have to sign all the essential forms, which would also require a countersignature of your IRA custodian.

The IRA custodian will examine the credibility of your application and paperwork, and will also be required to ensure that you are no making any illegal transaction.

Why choose a mortgage note over other methods of acquiring a real estate loan?

It is only natural for you to feel that you lack the expertise and financial know how to understand all the legal gibberish and turn in all the required paperwork for your loan effectively. Or even find a borrower, a loan service and arrange the loan all by yourself. Don’t worry, there are many others like and the reason behind this is the fact these are very exhausting and extensively laborious methods to find an investor for a loan.

Mortgage companies make your task simpler, easier and much more efficient. You do not have to run to investors to complete the amount you need, on the contrary, your mortgage company will be responsible for hitting up various sources, pooling in money and providing you with a secure loan that meets your required amount.

Mortgage notes aren’t just popular and widely used because they are quick and simple, but also, they save you from a great deal of mind blogging legal and financial gibberish as your mortgage company handles most of the extensive legal work for you.

Your mortgage company will:

  • Locate the borrower
  • Compile all the legalities and paperwork
  • Servicing the loan repayments


Moreover, IRA gives you a tremendous tax advantage, and you get a chance to increase your tax-deferred income. Hence, your mortgage note is the best method of increase the growth of your IRA, along with giving your investors a reliable security on their retirement funds.


Now, let’s examine the risk!

As long as there is an investment, whether it is in Gold, real-estate or the stock market, there is always going to be a risk, and mortgage notes are no exception to this financial rule.

However, the good news is that mortgage notes let you be the boss of how much risk you are willing to carry. You can get the rights to determine the property you want to invest in, the amount of loan you will require, and the payback payments that you can easily made. Private mortgage notes are overall a very secure and beneficial method of investing in real estate.

You can choose to do whatever you want with your property to pay off these payments, you can rent it out or even sell it, and if the market is going strong and there is an increase in the value of real-estate, you can pick up hefty rent cheques from your tenants and make a substantial profit while paying back your mortgage payments regularly and on-time.