A mortgage note is a document created when a borrower takes out a loan with a lender. The mortgage note states the terms of the loan, including the principal amount, interest rate and repayment schedule. In addition, the mortgage note details any fees that the mortgage holder may charge, such as an annual mortgage insurance premium.
Appraise the current value of the property.
The appraiser should also consider how much the interest on the loan would cost you each month. This is called “PMI” or private mortgage insurance. If you don’t have a mortgage, you don’t have to worry about PMI. If you do have a mortgage, you can deduct the cost from the value of the property.
Determine how much of the loan you've paid off.
Depending on the type of mortgage, you may have received either a primary or secondary mortgage. A primary mortgage is given to the lender to secure the outstanding debt. If you default on the loan, the lender has the right to take the house back. A second mortgage is given to the homeowner to take out a portion of the remaining loan balance. If you default on a second mortgage, the lender can take the house back, but it will not be able to take your belongings.
Add in any other outstanding debt.
The market value of a mortgage note is simply the current market value of the home plus the outstanding principal balance owed. To find the current market value of your home, you can either contact an appraiser or use a mortgage calculator. A mortgage calculator will give you an estimated value based on the current interest rate and the remaining principal balance owed.
Calculate the remaining principal and interest.
There are a number of different methods used to value a mortgage note, and each method has pros and cons. The two primary ways to value a mortgage note are a discounted cash flow analysis and the mortgage-to-market approach. The discounted cash flow analysis is typically used when the note is close to maturity, and the market value approach is typically used when the note is still relatively new. In the discounted cash flow analysis approach, you estimate the future cash flows until the note matures and discount them at your chosen interest rate to arrive at the current value. The mortgage-to-market approach subtracts the outstanding principal from the current outstanding principal balance and then adds in the accrued interest and any other additional debt.
Add in any prepayments you've made.
When putting a current mortgage balance on your valuation, be sure to subtract the principal balance of any loans that are still outstanding. Doing so will give you an actual cash value of the property and make your net equity more accurate. This is especially important if you're planning to sell your property in the near future.
Add in inflation.
If you have a mortgage loan, you typically receive a mortgage note. This document states the terms of the loan, including the interest rate, the principal amount, when payments are due, and any other terms and conditions you need to know. When you take out a mortgage loan, the lender gives you a loan amount, usually in the form of a check. They deduct the principal amount, which is the amount you owe on the loan, plus interest. That remaining amount is the amount you have left after the loan is paid off.
If you're refinancing, you might want to add in the fees involved.
As a lender, you’ll want to know how much you’ll make if you refinance your mortgage. The easiest way is to value your mortgage note. You can do this online by searching Zillow or a similar site. Once you find a current list price listing for your mortgage note, subtract the current outstanding balance, as well as any accrued interest and any other fees.
Conclusion
When you take a mortgage on a property, you typically sign a promissory note that outlines the terms of the loan. In addition to the principal amount you owe, the note usually lists the interest rate and terms of repayment. In order to value a mortgage note, you'll need to know the principal amount, interest rate, and length of the loan. The interest rate is the percentage of money the lender will charge you to borrow money.