What Happens When a Land Note Matures in Texas?

Understanding what happens when a land note matures in Texas is a question that every note holder will eventually face, yet surprisingly few think about until the maturity date is approaching. The maturity date is the date on which the final payment is due under the promissory note — it is the finish line of the note's life, the point at which all remaining principal and interest must be paid in full. For notes that are fully amortizing, the maturity date arrives quietly as the last scheduled monthly payment reduces the balance to zero. For notes with balloon payments — which are extremely common in Texas land deals — the maturity date arrives with a much larger financial event: a lump sum payment that the borrower may or may not be prepared to make. This guide will walk you through everything you need to know about what happens when a land note matures in Texas, including the legal framework, the practical realities, and the options available to both note holders and borrowers when that date arrives.

The maturity date of your Texas land note is defined in the promissory note, and it is a binding contractual obligation. Whatever that date is — whether it is next month or ten years from now — both you and the borrower are legally bound by it. The borrower is obligated to pay the remaining balance in full on or before that date, and you are obligated to release your lien once payment is received. In a perfect world, every note would reach maturity with the borrower making the final payment on time and the transaction concluding smoothly. In the real world, maturity events — particularly balloon payments — are one of the most common stress points in the lifecycle of an owner-financed Texas land note. Understanding how to navigate this event, whether as a note holder or a note seller, is essential to protecting your financial interests.

This article is designed for Texas land note holders who want to understand the maturity process thoroughly — not just the basics, but the nuances, complications, and strategic considerations that arise when a note reaches its end. Whether your note matures next year or a decade from now, the information here will help you plan ahead and make informed decisions about what happens when your land note matures in Texas.

Types of Note Maturity: Fully Amortizing vs Balloon

Fully Amortizing Notes

A fully amortizing note is one in which the monthly payments are calculated to pay off the entire principal balance plus all interest over the specified term. If you have a 15-year fully amortizing note, the 180th monthly payment will reduce the balance to zero, and the note is paid in full. For note holders with fully amortizing notes, the maturity event is straightforward — the borrower makes their final scheduled payment, you confirm that the balance is zero, and you release your lien on the property by recording a release of deed of trust (or delivering the deed if it is a contract for deed). There is no balloon payment, no lump sum due, and generally no drama. The key is to confirm that the final payment accurately reflects the remaining balance, including any adjustments for late fees, escrow, or other charges that may have accumulated over the life of the note.

Fully amortizing notes are less common in Texas land deals than balloon notes, primarily because the resulting monthly payments are often higher than borrowers can comfortably afford. A 50,000-dollar note at 10 percent over 10 years requires monthly payments of approximately 661 dollars. The same note amortized over 20 years requires monthly payments of approximately 483 dollars, but if the note includes a 10-year balloon, the borrower still owes a lump sum of approximately 38,700 dollars at the end of year 10. The balloon structure keeps payments affordable while ensuring the note holder receives the remaining balance within a reasonable timeframe. This trade-off is the reason balloon notes dominate the Texas land market.

Balloon Notes and the Maturity Event

A balloon note is one in which the monthly payments do not fully pay off the balance during the note's term, leaving a lump sum — the balloon payment — due at maturity. The balloon amount is whatever principal remains after all scheduled monthly payments have been applied. In some cases, the monthly payments cover only interest (an interest-only note), leaving the entire original principal as the balloon. In other cases, the monthly payments include some principal amortization, but not enough to pay off the full balance, leaving a reduced but still substantial balloon. The balloon payment is the defining feature of these notes, and it is the event that creates both opportunity and risk when the note matures in Texas.

For note holders, the balloon payment is the moment of truth. If the borrower has the funds to pay the balloon — either from savings, a refinance, the sale of the property, or another source — the note concludes successfully, and you receive your remaining balance. If the borrower does not have the funds, you face a decision: extend the note, negotiate new terms, foreclose, or sell the note to a buyer who can manage the situation. Each of these options has implications that we will explore in detail below.

When the Borrower Pays the Balloon: A Smooth Maturity

The Payoff Process

When a borrower is prepared to pay the balloon payment on a Texas land note, the process is similar to any other note payoff. The borrower (or their representative) requests a payoff statement from you or your servicer, showing the exact amount due including the remaining principal, any accrued interest through the expected payoff date, and any other charges. The borrower makes the payment — typically by wire transfer or cashier's check — and you confirm receipt. Once the full amount is received, you endorse the promissory note as "paid in full," execute and record a release of deed of trust in the county where the property is located, and deliver any other documents specified in the note or deed of trust. If the transaction was structured as a contract for deed, you deliver the deed to the borrower and record any necessary documents to transfer legal title.

Common Sources of Balloon Payment Funds

Borrowers who successfully pay their balloon payment typically obtain the funds from one of several sources. The most common is refinancing — the borrower obtains a conventional loan from a bank or credit union and uses the proceeds to pay off the balloon. This requires the borrower to qualify for conventional financing, which depends on their credit profile, income, and the property's eligibility for conventional lending. Another common source is the sale of the property — the borrower sells the property to a third party and uses the proceeds to pay you off. Personal savings, family assistance, or a combination of sources can also fund the balloon. The key point for note holders is that the borrower's ability to pay the balloon is not guaranteed, and understanding the likely source of funds well before the maturity date helps you assess the risk and plan accordingly.

When the Borrower Cannot Pay the Balloon: Navigating the Challenge

Why Borrowers Fail to Pay

When a land note matures in Texas and the borrower cannot make the balloon payment, it is usually because the refinancing did not come through. As discussed throughout this article, conventional lenders are often reluctant to finance rural Texas land, particularly raw or minimally improved acreage. A borrower who planned to refinance the balloon may discover that no lender will make the loan — perhaps because the property does not meet the lender's collateral requirements, the borrower's credit is not strong enough, or the loan amount is too small to be profitable for the lender. Other reasons include a decline in the borrower's financial situation, a decline in the property's value, or simply poor planning — the borrower knew the balloon was coming but did not take steps to prepare for it. Whatever the reason, a borrower who cannot pay the balloon at maturity creates a situation that requires the note holder's active management.

Extending the Note or Modifying Terms

One of the most common responses to a borrower who cannot pay the balloon is to extend the note — agreeing to push the maturity date back by a specified period (typically one to five years) to give the borrower more time to arrange payment. An extension may be granted on the existing terms or with modified terms, such as a higher interest rate to reflect current market conditions, increased monthly payments to accelerate principal paydown, a requirement for a partial lump sum payment at the time of extension, or additional covenants such as a requirement to maintain the property or obtain insurance. The extension should be documented in a written modification agreement signed by both parties and, ideally, recorded in the county records.

Extending the note can be a reasonable solution if the borrower has a realistic plan for paying off the balloon within the extension period and has maintained a good payment history. However, extending without a clear path to payoff simply postpones the problem and can leave you in a weaker position — the property may be worth less in a few years, the borrower's financial situation may deteriorate further, and you have added years to an already long holding period. Before agreeing to an extension, honestly assess whether it is likely to result in a successful outcome or merely delay an inevitable default.

Foreclosure After a Balloon Maturity Default

If the borrower cannot pay the balloon and you are not willing to extend the note, the failure to pay constitutes a default that entitles you to pursue your remedies under the deed of trust or contract for deed. For notes secured by a deed of trust, this means the non-judicial foreclosure process — sending the required notices, posting the sale, and conducting the auction at the county courthouse. The process is the same as for any other default and takes approximately 60 to 90 days when handled correctly. For a complete walkthrough, our guide on foreclosing on a land note in Texas covers every step.

Foreclosure after a balloon maturity default can be particularly frustrating because it often comes after years of otherwise good performance. A borrower who made every monthly payment on time for five or ten years but cannot come up with the balloon is a difficult situation emotionally and practically. You may have a good relationship with the borrower, and the prospect of foreclosing on someone who has been a reliable payer is understandably uncomfortable. But the balloon payment was a contractual obligation, and your financial interests deserve protection. If foreclosure is the right decision, move forward firmly and professionally, with the understanding that you are exercising legitimate legal rights.

Selling Your Note Before or After Maturity

Selling Before Maturity

If you hold a Texas land note with a balloon payment approaching and you are uncertain about the borrower's ability to pay, selling the note before maturity can be an attractive option. By selling, you receive a lump sum based on the note's current value and transfer the maturity risk to the buyer. The buyer — typically an experienced note investor — takes on the responsibility of collecting the balloon or managing the situation if the borrower cannot pay. For note holders who do not want to deal with the uncertainty and potential complications of a balloon maturity, selling before the event provides certainty and peace of mind.

The timing of the sale matters. A note with a balloon coming due in six months is a different proposition for a buyer than a note with a balloon due in three years. The closer the balloon date, the more the note's value is influenced by the buyer's assessment of the borrower's likelihood of paying the balloon. If the buyer believes the borrower will pay, the note can command a strong price. If the buyer is skeptical, the pricing will reflect the anticipated cost of managing a default and foreclosure. Selling well before the maturity date gives you the best opportunity to capture the note's value as a performing asset with predictable cash flows, rather than as a balloon-maturity risk.

Selling After a Balloon Default

If the balloon has already come due and the borrower has not paid, you can still sell the note — but the pricing will reflect the non-performing status. The buyer will evaluate the property value, the foreclosure costs and timeline, and the likely recovery to determine their offer. Even in this scenario, selling can be preferable to managing the foreclosure yourself, particularly if you live far from the property, do not want to deal with the legal process, or need cash rather than a property. Longhorn Note Buyers has extensive experience purchasing Texas land notes in all stages of maturity, including those where the balloon has passed without payment. With over $46 million in Texas notes purchased, they have the expertise to evaluate these situations and provide fair offers regardless of the note's current status. For more on how note value is determined, our article on what determines note value provides a thorough overview.

Preparing for Maturity: What Note Holders Should Do Now

Review Your Note Terms

The first step is to review your promissory note and identify the maturity date, the type of maturity event (fully amortizing final payment or balloon), and the exact amount that will be due. If you use a servicer, ask them to provide an amortization schedule showing the projected balance at maturity. If you do not use a servicer, calculate the expected balloon amount yourself or have an accountant or attorney do it. Knowing exactly what is due and when it is due is the foundation for all of your planning. If the maturity date is more than a year away, you have time to evaluate your options and prepare. If it is approaching within the next few months, acting quickly is important.

Communicate with Your Borrower

Having a conversation with your borrower about the upcoming maturity event well in advance is one of the most valuable things you can do. Find out whether the borrower is aware of the maturity date and the amount due. Ask whether they have a plan for making the payment — refinancing, savings, property sale, or another source. If they do not have a plan, this early conversation gives both of you time to explore options, whether that means the borrower starts working on refinancing now, you begin discussing an extension, or you decide to sell the note while it is still performing. Waiting until the maturity date to discover that the borrower has no plan is the worst possible scenario and is entirely preventable with proactive communication.

Evaluate Your Own Priorities

Before the maturity event, take time to evaluate your own financial priorities and goals. If the balloon is paid, how will you reinvest the proceeds? If the borrower cannot pay and you need to extend, are you comfortable holding the note for additional years? If the situation requires foreclosure, are you prepared to invest the time, money, and effort required? If selling the note before maturity would allow you to achieve your financial goals with less risk and hassle, this might be the optimal choice regardless of whether the borrower can pay the balloon. Having clarity about your own priorities makes every subsequent decision easier and more rational.

Ready to Sell Your Note?

Whether your Texas land note is approaching maturity, has a balloon payment coming due, or has already matured with an unpaid balloon, Longhorn Note Buyers can provide a fair evaluation and a no-obligation quote within 24 hours. With over $46 million in Texas notes purchased and a 100 percent close rate on every deal quoted, Longhorn Note Buyers has the experience and capital to handle notes at every stage of their lifecycle. Founded by Nick McFadin — buying notes since 1983 — and partnered with Sandy McFadin since 2013, Longhorn is based in San Antonio and works exclusively in Texas. Call (210) 828-3573 or visit longhornnotebuyers.com today to find out what your note is worth. Whether you are planning ahead or dealing with a maturity situation right now, Longhorn can help you navigate the best path forward.

Frequently Asked Questions

What happens if the borrower ignores the balloon payment due date?

If the borrower fails to pay the balloon on the maturity date and does not communicate with you about an extension or alternative arrangement, the unpaid balloon constitutes a default under the promissory note. You have the right to accelerate the note (if not already accelerated by the maturity itself), send the required notices, and proceed with foreclosure. The fact that the borrower has been making regular monthly payments does not excuse the failure to pay the balloon — the balloon payment is a contractual obligation, and failure to pay it is a default. Acting promptly when the balloon goes unpaid protects your rights and puts you in the strongest position to recover your investment.

Can I charge interest after the maturity date if the balloon is not paid?

Whether interest continues to accrue after the maturity date depends on the terms of your promissory note. Many well-drafted notes include a provision stating that the note bears interest at the contract rate (or a specified default rate) until paid in full, regardless of the maturity date. If your note includes such a provision, interest continues to accrue on the unpaid balance even after the maturity date. If the note is silent on post-maturity interest, you may still be entitled to the Texas statutory interest rate on judgments, but the legal analysis becomes more complex. Reviewing your note with an attorney can clarify your rights regarding post-maturity interest.

Should I extend the note or foreclose if the borrower cannot pay the balloon?

The answer depends on your assessment of the borrower and the situation. If the borrower has been reliable throughout the note's term, has a credible plan for paying within the extension period, and the property value supports the remaining balance, an extension may be the practical choice. If the borrower has been problematic, has no realistic plan for payment, or the property value has declined, foreclosing may be the better option. You can also explore selling the note — whether before or after the maturity event — as a way to receive cash without the complications of extending or foreclosing. Each situation is unique, and consulting with a professional who understands Texas land notes can help you evaluate the best path.

How does note maturity affect the price I would get if I sell the note?

A note with a balloon approaching maturity is evaluated by buyers based on the likelihood of the borrower paying the balloon. If the buyer is confident the balloon will be paid — because the borrower has strong financials, the property supports refinancing, or other indicators are positive — the note can command a strong price reflecting the near-term payoff. If the buyer is uncertain about the balloon being paid, the price will reflect the cost and risk of managing a potential default and foreclosure. Notes that have already passed their maturity date with an unpaid balloon are priced as non-performing or distressed assets, which carry steeper discounts. Selling before the maturity date, while the note is still performing, generally produces the best price.

What documents do I need to release the lien when the note is paid off?

When a Texas land note matures and the borrower pays the full amount due, you need to release your lien on the property. For a deed of trust, this is done by executing a release of deed of trust (sometimes called a release of lien) and recording it in the county where the property is located. The original promissory note should be endorsed as "paid in full" and returned to the borrower. For a contract for deed, you deliver the deed to the borrower, transferring legal title. Recording fees for the release are modest and are typically paid by the borrower. It is important to complete the release promptly — Texas law requires lienholders to release their liens within a reasonable time after payoff, and failure to do so can result in liability. Having your attorney prepare the release documents ensures they are in proper form for recording.