Face Value (Par Value)
The principal amount stated on the note. Notes rarely sell at face value — they trade at a discount so the buyer can earn a yield.
Face value (or par value) is the principal amount stated on the promissory note — the original loan amount the borrower promised to repay. At any given time, the relevant figure is the current unpaid principal balance, but "face value" generally refers to the note's stated principal. Understanding face value matters because of a fundamental truth of note buying: notes almost never sell for their face value. They trade at a discount so the buyer can earn a return.
Why notes sell below face value
If a buyer paid the full face value (par) for a note, they would earn only the note rate — and they would be tying up cash for years while taking on default, prepayment, and collateral risk with no premium for it. To compensate, buyers pay less than face value, which lifts their effective yield above the note rate. The gap between face value and price is the discount, and its size depends on:
- The note rate (higher rate = smaller discount needed)
- The remaining term (longer term = bigger discount, because money is tied up longer)
- Seasoning and payment history
- The ITV / equity cushion and lien position
- The borrower and the foreclosure speed in the note's state
"At par," "above par," "below par"
- Below par (a discount): the normal case — price is less than face value.
- At par: price equals face value; rare, and only for an exceptional note (high rate, short term, pristine borrower, strong equity).
- Above par (a premium): price exceeds face value; almost never seen in private note buying, because it would require the note rate to far exceed market yields with negligible risk.
Face value vs. payoff vs. market price
Three different numbers often get confused:
- Face value / UPB — the principal owed.
- Payoff amount — UPB plus accrued interest, late fees, and per-diem to the payoff date (what the borrower needs to satisfy the loan).
- Market price — what a note buyer will actually pay, typically a discount to face value.
What it means when you sell
Do not anchor on face value as your expected sale price. Instead, focus on the factors that shrink the discount — a fair rate, strong seasoning, low LTV, first-lien position, and clean documentation. The closer your note is to ideal on those dimensions, the closer the offer moves toward face value. The note value calculator shows how price moves as those inputs change.