How Much Is My Promissory Note Worth?

The value of a Texas promissory note is determined by several measurable factors: the borrower's payment history, the interest rate, the loan-to-value ratio, the remaining balance and term, the property type and location, and the quality of the documentation. Notes with 12 or more on-time payments, interest rates above 8%, and LTV ratios below 80% typically sell for 70–90% of the unpaid balance. Longhorn Note Buyers, a San Antonio company that has been buying Texas notes since 1983 with more than $47 million purchased and a 100% close rate, provides same-day quotes and closes 100% of accepted offers with no fees.

This guide explains each factor that determines what your promissory note is worth so you can understand how professional buyers calculate their offers.

The Fundamental Concept: Present Value of Future Cash Flows

At its core, the value of a promissory note is determined by the present value of the future cash flows it produces. This is the same principle used to value bonds, annuities, business income streams, and virtually every other financial instrument that generates periodic payments. The concept is straightforward even if the math can get complex: money received in the future is worth less than money received today, and the process of determining how much less is called discounting. When a note buyer evaluates your promissory note, they're calculating the present value of every remaining payment using a discount rate that reflects the risk of those payments not being received.

How Discount Rates Work

The discount rate is the rate of return the buyer requires on their investment, and it's the single most important variable in determining your note's value. A lower discount rate produces a higher present value (and therefore a higher purchase price for you), while a higher discount rate produces a lower present value. Think of the discount rate as the buyer's compensation for taking on risk — the riskier the note, the higher the discount rate they require, and the less they'll pay. For Texas real estate notes, typical discount rates range from about 8 percent for the safest notes to 16 percent or more for the riskiest ones. A note with a buyer-required discount rate of 10 percent will sell for significantly more than an identical note priced at a 14 percent discount rate. Understanding this relationship is key to understanding why your note is worth what it's worth.

A Simple Example to Illustrate the Math

Suppose your note has a remaining balance of $100,000, an interest rate of 9 percent, monthly payments of $900, and 180 payments remaining (15 years). If a buyer requires a 10 percent yield, they'd pay approximately $92,000 for your note — about 92 cents on the dollar. If the same buyer required a 12 percent yield due to higher perceived risk, they'd pay approximately $82,000 — about 82 cents on the dollar. Same note, same payments, same borrower — the only difference is the buyer's required yield, which is driven by the note's risk characteristics. That $10,000 spread between 92 and 82 cents on the dollar illustrates why the factors that influence risk perception matter so much. Every factor that reduces perceived risk pushes the discount rate down and your note's value up, and every factor that increases perceived risk does the opposite.

The Seven Key Factors That Determine How Much Your Promissory Note Is Worth

While the present value calculation provides the mathematical framework, the practical question is what determines the discount rate — the buyer's required yield — for your specific note. Seven primary factors drive this determination, and understanding each one gives you a clear picture of where your note stands in the market and what you can realistically expect to receive.

Factor One: Payment History and Seasoning

The borrower's track record of making payments is arguably the single most influential factor in your note's valuation. A note where the borrower has paid perfectly for 36 months is dramatically more valuable than an identical note with only 3 months of history. This is because payment history is the most reliable predictor of future performance — a borrower who has demonstrated the ability and willingness to pay for three years is statistically far less likely to default than one who has made only a handful of payments. Most buyers classify seasoning into tiers: notes with 0 to 6 months of history are considered new and carry the highest risk premiums; 6 to 12 months is moderately seasoned; 12 to 24 months is well-seasoned; and 24-plus months is fully seasoned. The value difference between a new note and a fully seasoned one can be 10 to 15 percentage points of the remaining balance — on a $100,000 note, that's $10,000 to $15,000 more in your pocket. For more detail, read our guide on land note seasoning requirements in Texas.

Factor Two: Interest Rate on the Note

The interest rate on your note directly affects its value because it determines how much income the note generates per dollar of balance. Higher interest rates produce more income, which means the buyer can afford to pay more for the note and still achieve their target return. In today's market, notes with interest rates at or above 8 percent are considered attractive, and those above 10 percent are premium. Notes with rates below 6 percent are harder to sell at attractive prices because the buyer's yield after applying their discount becomes thin. To put concrete numbers on it, a $100,000 note at 10 percent interest might sell for 90 cents on the dollar, while the same note at 6 percent interest might sell for only 78 cents on the dollar — all else being equal. The interest rate is set at origination and can't be changed after the fact, so this factor is what it is. But knowing how it affects value helps you understand your offer and set realistic expectations.

Factor Three: Loan-to-Value Ratio

The loan-to-value ratio measures the remaining note balance against the current market value of the property. It tells the buyer how much equity cushion exists to protect their investment if things go wrong. An LTV of 50 percent means the borrower owes half of what the property is worth — if the buyer had to foreclose, there's a substantial margin of safety. An LTV of 90 percent means the borrower owes nearly as much as the property is worth, leaving almost no cushion. Buyers strongly prefer LTVs below 70 percent, and notes with LTVs below 50 percent command premium pricing. The LTV may have improved since your note was created due to the borrower's principal payments reducing the balance and potential property appreciation increasing the value. A buyer will determine the current LTV during due diligence using a fresh property valuation.

Factor Four: Property Type and Location

The property securing your note is the buyer's ultimate backstop — if the borrower defaults, the property is what the buyer recovers through foreclosure. Not surprisingly, certain property types are considered safer collateral than others, and this preference directly affects your note's value. Owner-occupied single-family homes are the gold standard and command the highest prices because homeowners are the most motivated to keep paying (it's their home) and these properties are the easiest to value and resell. Investment properties, duplexes, and small multi-family buildings are a step below. Commercial properties and vacant land carry progressively higher risk premiums. Location matters too — a property in a growing Texas metropolitan area like Austin, Dallas, Houston, or San Antonio is more valuable collateral than an equivalent property in a remote rural area with fewer comparable sales and less buyer demand.

Factor Five: Remaining Term and Payment Structure

The number of remaining payments and the structure of those payments influence value in several ways. Shorter remaining terms are generally preferred by buyers because they recover their capital faster, reducing their exposure to long-term risks. A note with 10 years remaining is typically more valuable per dollar of balance than one with 25 years remaining. Notes with balloon payments are evaluated based on both the regular payment stream and the balloon — the buyer needs to assess the likelihood that the borrower will be able to satisfy the balloon when it comes due. Fully amortizing notes with no balloon are the simplest to value because the cash flows are entirely predictable from the current payment through the final payment.

Factor Six: Documentation Quality and Legal Structure

The quality of your note's documentation can affect its value, particularly if there are deficiencies that create legal risk for the buyer. A note that was drafted by an attorney using standard forms, properly executed with all required signatures, supported by a correctly recorded deed of trust, and originated in compliance with applicable regulations (including Dodd-Frank for residential properties) will command a premium over a note with informal documentation, missing signatures, recording errors, or compliance questions. While documentation issues don't always kill a deal, they increase the buyer's risk and cost and are reflected in the price. If you're unsure about the quality of your documentation, having it reviewed by an attorney before going to market can help you identify and correct any issues that might reduce your note's value.

Factor Seven: Current Market Conditions

Like any asset, promissory notes exist within a broader market context that influences pricing. When prevailing interest rates are high, note buyers can find competing investments that offer strong yields, which means they require higher returns from promissory notes and pay less. When prevailing rates are low, the relative attractiveness of note yields increases, driving prices up. The availability of capital in the note buying market also matters — when institutional investors are actively deploying capital into the note space, competition for good notes increases and prices improve. As of 2026, the Texas note market remains active with healthy buyer competition, though pricing naturally fluctuates with broader economic conditions.

Price Ranges by Note Type — What to Realistically Expect

While every note is unique, grouping notes by their general characteristics provides useful benchmarks for setting expectations. These ranges represent the typical market as of 2026 and assume notes secured by Texas real estate.

Premium Performing Notes (90-95 Cents on the Dollar)

These are the cream of the crop — notes with interest rates above 8 percent, 24-plus months of perfect payment history, LTVs below 60 percent, and properties that are owner-occupied single-family homes in strong Texas markets. These notes present minimal risk to buyers and command prices close to their full principal balance. If your note fits this profile, you're in an excellent position and should expect strong offers from multiple competing buyers. On a note with a $120,000 remaining balance, premium pricing means you'd receive $108,000 to $114,000 in cash.

Solid Performing Notes (80-90 Cents on the Dollar)

The majority of Texas notes fall into this category — performing with decent but not exceptional characteristics. These notes might have interest rates between 6 and 8 percent, 12 to 24 months of seasoning, LTVs between 60 and 75 percent, or property types beyond the single-family home sweet spot. They're desirable notes that buyers want, but they carry enough risk to warrant a moderate discount. On a $120,000 balance, this means $96,000 to $108,000 in cash. Understanding why your note falls in this range rather than the premium range can help you identify steps you might take to improve its value — for example, waiting a few more months to build seasoning.

Challenged Performing Notes (70-80 Cents on the Dollar)

Notes with one or more significant risk factors fall into this range. Common characteristics include interest rates below 6 percent, limited seasoning under 12 months, LTVs above 75 percent, properties in less desirable locations or of less desirable types, or a few late payments in the history. These notes are absolutely sellable, but the discount is steeper. On a $120,000 balance, expect $84,000 to $96,000. Knowing where your note's challenges lie can help you decide whether to sell now or address the issues first.

Sub-Performing and Non-Performing Notes (40-70 Cents on the Dollar)

Notes where the borrower is seriously behind or has stopped paying altogether are valued primarily based on the underlying property rather than the cash flow stream. The price depends heavily on the equity position and the estimated costs of resolution. On a $120,000 balance, this means $48,000 to $84,000 — a wide range that reflects the enormous variability in non-performing note situations. Even at these discounts, selling often makes financial sense when you compare the immediate cash to the uncertain and costly alternative of pursuing collection or foreclosure yourself.

How to Get an Accurate Valuation of Your Promissory Note

Understanding the factors that influence value is useful, but nothing replaces an actual market valuation from a qualified buyer. A professional note buyer can assess your specific note against all seven factors and provide a concrete number — not a range, not an estimate, but an actual cash offer based on their analysis of your note's unique characteristics.

The Free Quote Process

The easiest and most accurate way to determine what your promissory note is worth is to request a free quote from one or more professional note buyers. This process is fast (most buyers respond within 24 hours), free (reputable buyers never charge for quotes), and carries no obligation (you're under no pressure to sell). You provide the basic details of your note — balance, rate, payment, term, property description, and payment history — and the buyer provides a specific dollar amount they're willing to pay. This is not a theoretical valuation but an actual market offer that you can accept or decline. Getting quotes from two or three buyers gives you a reliable picture of your note's current market value.

Factors You Can Improve Before Getting Valued

While most of your note's characteristics are fixed, there are some steps you can take to potentially improve your valuation. Building more seasoning by waiting until you have 12 or 24 months of on-time payments can significantly increase your price. Ensuring that the property is adequately insured and that property taxes are current removes potential concerns for buyers. Having your documentation organized, complete, and readily available signals professionalism and reduces the buyer's perceived risk. And if there are any known title issues, resolving them before going to market eliminates a factor that could reduce your offer or delay your closing.

Ready to Sell Your Note?

The only way to know exactly how much your promissory note is worth is to get a professional valuation from an experienced buyer. Longhorn Note Buyers has been valuing and purchasing Texas promissory notes since 2007, with founding partner Nick McFadin bringing over 40 years of note buying expertise to every evaluation. We've purchased more than $46 million in Texas notes across every type — residential, land, commercial, performing, and non-performing — and our pricing is based on deep market knowledge and honest, transparent analysis. Our 100 percent close rate means that the number we give you is the number you'll receive at closing.

Find out what your promissory note is worth today. Call (210) 828-3573 or visit longhornnotebuyers.com for a free, no-obligation valuation within 24 hours. We'll explain exactly how we arrived at our number and what factors are driving the price. Whether your note is worth $30,000 or $300,000, you deserve to know — and that knowledge is free.

Frequently Asked Questions About Promissory Note Valuation

Is the value of my note the same as the remaining balance?

No, the market value of your note is almost always less than the remaining unpaid balance. The remaining balance is what the borrower owes over time, while the market value is what a buyer will pay in cash today. The difference — the discount — reflects the time value of money, the risk of the note, and the buyer's required return on investment. For strong performing notes, the market value might be 90 to 95 percent of the remaining balance. For riskier or non-performing notes, it could be 40 to 70 percent. The only way to know the specific market value of your note is to get a quote from a professional buyer.

Does the property's current value affect what my note is worth?

Absolutely. The property's current market value determines the loan-to-value ratio, which is one of the most important factors in note pricing. If the property has appreciated since your note was created, your LTV has improved and your note is worth more. If the property has declined in value, the LTV has worsened and your note is worth less. For non-performing notes, the property value becomes the primary driver of the note's market value since the income stream has stopped. Buyers will obtain a current property valuation during due diligence to confirm the LTV before finalizing their offer.

Can I increase the value of my note before selling?

The most impactful way to increase your note's value is to build more seasoning — more months of on-time payments. If your note has 8 months of history and you can wait until you have 12 or 24 months, the improvement in pricing can be substantial. Beyond seasoning, ensuring clean documentation, verifying that insurance and taxes are current, and resolving any known title issues can all marginally improve your note's value. However, the interest rate, loan-to-value ratio, and property type are generally fixed characteristics that you can't change. Focus on the factors within your control and be realistic about those that aren't.

How often does the value of my note change?

Your note's value changes continuously, though usually gradually. Each on-time payment adds seasoning and slightly improves value. Principal paydown and property appreciation can improve the LTV, increasing value. Changes in prevailing interest rates and market conditions can push values up or down. A missed payment can significantly reduce value overnight. For most performing notes, the value trends slowly upward over time as seasoning accumulates and the LTV improves. Dramatic shifts are rare unless the borrower's payment behavior changes or the broader market experiences a significant disruption.

Why do different buyers offer different amounts for the same note?

Different buyers offer different amounts because they have different return requirements, different risk assessments, and different cost structures. An institutional buyer with low overhead might accept a 9 percent yield, while a smaller buyer with higher costs might require 12 percent. A buyer who specializes in Texas land notes might be more comfortable (and therefore price more aggressively) with a rural land note than a generalist buyer who sees the same note as risky. Different valuation methodologies, different property value estimates, and different assessments of borrower reliability all contribute to price variation between buyers. This is why getting multiple quotes is valuable — it ensures you're seeing the full range of what the market will pay for your specific note.