What Is a Partial Note Purchase?

A partial note purchase is the sale of some of the payments on your note. A buyer pays you a lump sum for a set number of them, collects those payments, and then the note and everything still owed on it return to you.

What changes hands, and what stays yours

Your note pays you every month until it is paid off. In a full sale every remaining payment goes to the buyer in exchange for one check. In a partial the buyer takes only a block of them, for example the next 60, and you keep everything after that block.

While the buyer is collecting, the monthly payments go to them and the note is assigned to them. Once they have received the number they paid for, the note is assigned back and the payments are yours again. The payer’s rate, payment and payoff date stay as they were throughout, and the one thing the payer notices is a new place to send the money.

Who a partial suits

It suits a holder who needs a specific sum that is well short of what the whole note is worth. If $50,000 solves the problem, selling a note with $129,000 owed on it gives away more than the problem requires. It also suits someone who likes the monthly income and wants it to resume later, and someone whose full-sale offers came in lower than they are willing to take on the entire note.

A full sale is the better choice when you want to be finished with the note and the payer, when you need the largest check available now, or when an estate has to be divided into cash that heirs can split.

The idea in figures

Picture a note with a $1,140 monthly payment, 168 payments to go and a balance near $129,400. A buyer looking for an 8% yield on their money might offer the following.

For the whole note: $115,000 today, and nothing further.
For the next 60 payments: $56,200 today, after which the note comes back with 108 payments of $1,140 left and about $94,950 owed to you.

Illustrative example on a note that carries 6% interest. An actual offer will differ with the payer’s record, the property and the buyer.

The partial puts less in your hand today. Five years on, though, you again own a note with nine years of payments ahead of it. Add up what each route pays in total and the gap is wide, as you can see with the same note priced side by side at other sizes.

Why selling the near payments costs less

A buyer sets the price from the return they need. The further off a payment is, the less they will pay for it now, since they wait longer for it and carry the risk for longer.

A partial sells only the near payments, which lose the least to that markdown, and leaves the distant ones with you to collect in full as they fall due. Less of what the note would have paid you ends up with the buyer than in a full sale of the same note, though whether the discount is lower on a partial depends on what you measure it against.

Points the agreement should cover

A partial runs for years, so before signing, ask the buyer to show you where the agreement answers each of these:

If the payer pays the note off early, the buyer receives what they are still owed and the rest of the payoff goes to you.
If the payer stops paying, the agreement names who decides what happens next and what choices you have.
When the buyer has their payments, the note is reassigned to you without your having to ask, and the agreement says who pays to record that.

Buyers answer these differently, which is why the partial purchases guide gives each one its own section and a list of questions to put to any buyer.

Whether your note can carry one

A partial needs enough payments left to divide, a payer whose record a buyer can verify, and a buyer who writes partials, which some do not. A note close to its final payment, or one where the payer is behind, may draw full-sale offers only. The way to find out is to ask for both prices at once: when you send in your note details, tell us the amount of cash you need, and we will ask buyers for a partial sized to it alongside the full-sale price.