Ideas for a better investment
Mortgage Notes vs. Tax Liens: (Plus Where Infinite Banking Fits In)
Mortgage notes vs. tax liens — how each asset works, plus where infinite banking fits as a funding strategy. A 2026 guide for note investors.
8 min read
Investors researching alternatives to the stock market often run into the same three strategies: mortgage notes, tax liens, and infinite banking. They’re frequently lumped together, but they’re not the same kind of thing. Mortgage notes and tax liens are asset classes you invest in; infinite banking is a funding strategy you use to deploy capital. This guide explains how each works, how they compare, and how some investors combine them.
Key Takeaways
- Mortgage notes make you the lender on a real estate loan — you collect monthly principal and interest at a yield.
- Tax liens are government claims for unpaid property taxes; investors earn a statutory return when the owner redeems, or may foreclose if not.
- Infinite banking isn’t an asset — it’s a strategy using whole life insurance cash value as a source of capital.
- Notes pay ongoing monthly income with more control; tax liens have a lower entry cost but event-driven, less predictable returns.
- The three can combine — for example, borrowing against a policy to buy mortgage notes.
The Key Difference Up Front
Before comparing returns, it helps to sort these into the right categories — because mixing them up leads to bad decisions.
Mortgage Notes
You buy real estate debt and become the lender, collecting monthly payments.
Tax Liens
You buy a government’s claim for unpaid property taxes and earn a statutory return on redemption.
Infinite Banking
You use whole life cash value as a capital source to fund other investments.
So the honest framing isn’t “notes vs. liens vs. banking” as three interchangeable investments. It’s two asset classes (notes and liens) plus one financing method (infinite banking) that can fund either of them.
What Is Mortgage Note Investing?
Mortgage note investing means buying a real estate loan — the borrower’s promissory note and the lien securing it — so you step into the lender’s role. You collect the monthly principal and interest, earning a yield based on the discount you paid. Notes fall into two categories: performing (borrower current, steadier passive income) and non-performing (defaulted, deeper discount, active workout). The property serves as collateral, giving notes a secured, income-producing profile. Learn the basics in our guide to buying your first mortgage note.
What Is Tax Lien Investing?
When a property owner falls behind on property taxes, the local government can place a tax lien on the property. In many jurisdictions, that lien is sold to investors at auction to recover the unpaid taxes. As the lien holder, you’re entitled to repayment plus a statutory interest rate or penalty when the owner “redeems” by paying what they owe. If the owner never redeems within the redemption period, you may be able to foreclose and potentially acquire the property.
What Is the Infinite Banking Concept?
The Infinite Banking Concept (IBC) is a cash-management strategy built around a dividend-paying whole life insurance policy. Over time the policy builds cash value, which you can borrow against to fund purchases or investments — while the policy’s cash value continues to grow. The idea is to “become your own banker,” recapturing the interest you’d otherwise pay a lender. Critically, IBC is not an asset class; it’s a financing method. Whole life insurance is a long-term, costly commitment, and the strategy is debated — so professional guidance matters.
Mortgage Notes vs. Tax Liens vs. Infinite Banking: Head-to-Head
The table below summarizes how the three compare across the factors investors care about most. Returns are described qualitatively because they vary widely by deal, jurisdiction, and policy.
| Factor | Mortgage Notes | Tax Liens | Infinite Banking |
|---|---|---|---|
| Category | Asset (real estate debt) | Asset (government lien) | Funding strategy |
| Income type | Monthly principal & interest | Statutory interest on redemption | Policy growth + access to capital |
| Return driver | Rate + discount paid | Statutory rate (varies by area) | Dividends + borrowing efficiency |
| Predictability | Ongoing, schedule-based | Event-driven (redemption) | Steady but modest growth |
| Control | High (you own the note) | Moderate (statute-bound) | High (your policy) |
| Typical entry cost | Moderate (partials lower it) | Often lower per lien | Ongoing premiums |
| Liquidity | Limited; resellable | Limited; tied to redemption | Loanable cash value |
| Where to acquire | Note marketplaces | County/municipal auctions | Insurance carrier |
How These Strategies Can Work Together
Because infinite banking is a funding method rather than an asset, it can actually power the other two. A common pattern: an investor borrows against a whole life policy’s cash value, uses those funds to buy a mortgage note, then uses the note’s monthly income to repay the policy loan — all while the policy keeps compounding. The same logic could fund tax lien purchases. This layering can be powerful but adds cost and complexity, and it concentrates several moving parts into one plan, so it suits experienced investors working with advisors.
Which Strategy Is Right for You?
- Choose mortgage notes if you want ongoing monthly income, collateral behind your investment, and more control over the asset — and you’re willing to do real due diligence. Partials and SDIRAs lower the entry barrier.
- Consider tax liens if you want a lower per-deal entry cost and a statutory return, and you’re comfortable with auction dynamics, redemption timelines, and jurisdiction-specific rules.
- Explore infinite banking if you want a long-term capital-management vehicle to fund investments like notes — and you understand the cost and commitment of whole life insurance.
For many investors, mortgage notes are the most direct path to secured, income-producing real estate exposure — and the other two strategies become tools that support that goal rather than replace it.
Frequently Asked Questions
What is the difference between mortgage notes and tax liens?
A mortgage note is a real estate loan you buy to become the lender, collecting monthly principal and interest. A tax lien is a claim a government places on a property for unpaid property taxes; investors buy the lien and earn statutory interest when the owner redeems it, or may foreclose if it goes unpaid. Notes pay ongoing monthly income, while tax liens pay a fixed statutory return tied to redemption.
Is infinite banking an investment?
Not exactly. Infinite banking is a cash-management and financing strategy that uses the cash value of a dividend-paying whole life insurance policy as a source of capital. It is not an asset class like notes or tax liens. Investors often use the policy’s cash value to fund other investments, including mortgage notes, while the policy continues to grow.
Which is better: mortgage notes or tax liens?
Neither is universally better. Mortgage notes offer ongoing monthly income and more control over the asset, but require more capital per deal and active due diligence. Tax liens have a lower entry cost and a statutory return, but outcomes depend on redemption timelines and local rules, and returns are less predictable. The right choice depends on your capital, time, and goals.
Can you combine infinite banking with note investing?
Yes. A common approach is to borrow against the cash value of a whole life policy and use those funds to buy mortgage notes. The note income can then repay the policy loan while the policy’s cash value keeps compounding. This pairs a funding strategy (infinite banking) with an income-producing asset (notes), though it adds complexity and cost.
Are tax liens risky?
Tax lien investing carries real risks: the property owner may not redeem, the underlying property could have little value or other senior claims, redemption periods vary by jurisdiction, and rules differ widely between tax-lien and tax-deed states. Due diligence on the property and local statutes is essential before bidding.
What returns do mortgage notes offer compared to tax liens?
Mortgage note returns come from the interest rate and the discount paid, and vary with whether the note is performing or non-performing. Tax lien returns are set by statute and vary by jurisdiction, sometimes reaching high rates, but only realize when the owner redeems. Note income is ongoing and monthly, while tax lien income is event-driven, so the two behave very differently.