Finance category
Mortgage, loan, investing, tax, and money calculators.
Note Sale Discount Calculator
A seller holding a private mortgage note can sell it to a note buyer for cash today — at a discount. Note buyers pay present value of remaining payments using a target yield (typically 9-14%). This calculator sizes the cash offer, discount from face, and effective yield to the buyer.
Cash offer (present value)
$112,668
Discount from face
$37,332
Discount %
24.9%
Monthly payment
$1,163
How the math works
$150K balance at 7% note rate with 240 months remaining and 11% buyer yield: PV ≈ $112,460. Discount $37,540 = 25%. If the note were seasoned with 36 months clean history and 65% LTV, buyers might run 9% yield instead → PV $126,000, only 16% discount.
To improve the offer: document borrower strength (credit pull, income docs), provide seasoning history (12+ months of on-time payments), and furnish a recent BPO or appraisal. Note buyers pay more for certainty.
How to Use
- Enter remaining principal, interest rate, and months remaining.
- Enter the note buyer's target yield (discount rate).
- See present value (cash offer), discount from face value, and the discount as % of face.
Frequently Asked Questions
Why do buyers discount notes?
Risk (borrower default, property value drop) and opportunity cost (buyer's alternative returns). Seasoned notes with 24+ months of on-time payments discount less (15-25%). New notes or those with any late history discount more (30-40%+).
What drives the discount rate?
Borrower credit, property LTV, seasoning, coupon vs market rate. Strong 65% LTV, 720+ FICO, 36 months seasoned commands 9-10% yield discount. Weaker 80% LTV, 620 FICO, unseasoned commands 13-16% yield.
Partial or full note sale?
Partial: sell the next X months of payments, keep the tail. Full: sell everything. Partials get slightly better pricing per dollar sold and preserve your long-term yield; fulls give max cash now.
Tax impact of selling a note?
Complex. Recognized gain in year of sale equals sale price − remaining note basis. If gain is from a §453 installment sale, selling the note collapses installment treatment — full remaining gain is recognized in year of note sale. Talk to a CPA first.
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