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Hypothecation Loan

We have been purchasing notes, mortgages and real estate contracts for over a decade and we pride ourselves on a unique client experience at the best price possible.

Are you looking to scale your real estate or a mortgage portfolio without losing precious value in the process to discounts? If you are collecting payments on a mortgage loan and you need to generate tax-free capital fast, you may be able to use your mortgage loan as collateral through a hypothecation process. Hypothecation lending can assist lenders and private investors extract liquidity out of a mortgage loan being collected on, in as little as a few business days.

Hypothecation real estate definition: What is a hypothecation loan?

what is a land contract

A hypothecation loan, or the term hypothecation lending, refers to a loan transaction that allows an existing lender to pledge their mortgage receivables as collateral in exchange for a loan in order to provide working capital for reinvestment or asset accumulation.

Benefits of hypothecation loans

how do notes work

Typically speaking, when a lender or note holder wants to cash out a mortgage receivable, the only option is selling at some sort of discount, thus losing value on your assets in the process. Hypothecation 

loan benefits allow the lender to retain ownership of the assets while leveraging them to expand the portfolio footprint.

Warnings - hypothecating a mortgage

The primary risk to the borrower would be losing the collateral due to hardship or unforeseen circumstances. Non-payment would eventually mean that some or all of the collateral would be forfeited to the hypothecation lender in some capacity by the borrower. There needs to be a clear-cut investment strategy before implementing the use of hypothecation existing assets.

Typical Hypothecation Loan Criteria

The lending criteria of hypothecation loans are typically straightforward barring any special circumstances. 


1. Investment Purposes Only

Typically, hypothecation loans must be used in a way that supports an investment project. These are not consumer loan products such as borrower-occupied mortgages you get from Wells Fargo. 


2. Must-Have All Originals

In order to hypothecate a loan, the borrower must be in possession of all original, ink-signature notes and recorded ink-signature security instruments. This can not be done by Lost Note Affidavit.


3. Rates 

This could wildly vary depending on many factors such as market conditions, global pandemics, macro-economic landscape, etc., but rates typically range between 7.99% and 9.99%. There are swings in both directions, depending on the risk and predictability of the collateral. 


4. Term

Borrowers could expect interest-only terms in most cases. Payback periods range from one year up to seven. Most hypothecation lenders like to be out of an investment within 12 months to 5 years, depending on the predictability of the collateral-mortgage note. Some will go longer if their investment appetite allows. 


5. Acceptable Collateral Types?

What is acceptable collateral when it comes to a hypothecation loan? This is where hypothecation lending becomes very beneficial for the borrower vs selling a mortgage note at a discount. Acceptable collateral can be: a residential mortgage, a commercial mortgage, a borrower-occupied loan, a tenant occupied loan, a farmland loan, a basket of mortgages in your portfolio… the list goes on. As long as the pledged collateral is performing, it has good equity and a good track record, which will usually suffice, generally speaking.


What’s the process to get a Hypothecation Loan?

If you have a mortgage note in-hand, you can use it to receive a loan from Amerinote Xchange’s hypothecation loan program. All you need to do is follow the six simple steps listed below:

  • Apply for hypothecation loan: Receive a hypothecation loan scenario 
  • Submit all collateral-note information: Submit all of the information that you have regarding the collateral note/asset
  • Receive a quotation: Consider your offer and decide to move forward with it or not.
  • Lender due diligence: Hypothecation lender will perform their diligence, set up custodians if necessary

Funding: Funding will occur at a title company and/or through the use of a mobily notary. Transaction time-line is roughly 14-21 days.

Why Amerinote Xchange?

Amerinote Xchange is the fastest growing residential and commercial mortgage note buyer in the United States today. Our size allows us to participate in many facets of the mortgage and real estate spaces. We begin with a consultation on your hypothecation loan-goals in order to get you across a finish line in as little as 15 business days. When it comes to using a mortgage note as collateral, the chances of successfully reaching your financial goals and securing the highest loan amount become greatly increased when using the right funding source. Let Amerinote provide clarity when navigating the high waters of hypothecation lending.