Definition: The term "mortgage note investing" refers to a type of investment strategy that involves buying mortgage-backed securities (MBS) and then selling them in an effort to earn a profit from the difference between their price when purchased and what they are expected to pay when sold. In this context, "mortgage note" typically means a mortgage security bond issued by the government or other financial institution. When a borrower takes out a mortgage with a bank or lender, there is a lien placed on the property securing the loan and the value of that property is tied to the amount of the mortgage loan. This allows investors to invest in real estate at a lower cost than buying individual homes outright. When an investor purchases a mortgage note from a lender, they typically receive a security certificate issued by the bank or other financial institution representing the mortgage notes. The investor then holds onto the certificate and sells it when the value of the property falls below their investment costs. This strategy is often used to capitalize on the rising value of real estate markets. Overall, mortgage note investing involves buying and selling mortgage-backed securities in an effort to earn a profit from the difference between the price at which they are purchased and the amount expected to be paid when sold.
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