What interest rate do you assume sellers have on their mortgage?

Question

For purposes of an investor doing there due diligence and also for situation where a seller has no clue what they owe, interest rate, monthly payment amount etc.

Since mortgage notes recorded in the public records does not show interest rate only length of mortgage and its principle, what interest rates do you assume a seller would have and how can I learn how to assume this properly?

I've had investors tell me if it was 2010 then likely around 5%. Can anybody instruct me or give me some kind of trend for interest rates!? THANKS

Jason Hirko · Answer

@jose

@Jose Falconett Yes, mortgage calculator.org is good because it shows you the full tables. But what are you trying to do? Just because you know the original principal, interest rate, and financing date doesn't mean you can necessarily know the equity amount. There's too many variables - adjustable rates, refinances, early payments, late payments, reammortizations, etc.

Jason Hirko · Answer

@Jose Falconett You can find the historical average HERE. It shouldn't vary widely from that. I always just figure $600/month per every $100k financed as a quick calculation. That's 6% APR and you have to go back 15+ years to when loans were averaging more than that, so it's a quick rule of thumb

Jason Hirko · Answer

@Jose Falconett I don't think there's a way to find it out exactly - only estimates. It's the bank's information and they don't have to make it public. My point about being able to make a deal was just that if you have a willing seller, that's all you need to make a deal...even if they owe more than it is worth.

Chris Mason · Answer

Hi Jose,

I've a link for you: Monthly Average Rate and Points on 30-Year Fixed-Rate Mortgages Since 1971.

Note that this tracks the 100% perfect & solid scenario: high FICO, SFR, owner occupant, 20%+ down, solid DTI, half a discount point or more, etc etc etc... basically what everyone tracks and advertises, but that isn't always what you get if you read the small print. Because of that...

• Add about 0.375% to what you see there to get to ballpark "normal people" interest rates. 
• Also bump it more depending on how un-savvy you think your distressed seller is, if it's a mortgage from before 2013 when they could pay the LO bonuses for pushing higher rates.
• If it's an ARM from 2005-2007, there's a chance it was one of the 10 year i/o, then amortized over 20 (eg, starting 2015-2017). A lot of your recently distressed sellers are in these toxic mortgages that just blew up on them.

Jose Falconett · Answer

@Jason Hirko Trying to find out what the equity is in a property is usually done no matter the strategy. It is less emphasized in rentals but still important to know that a deal can be made so that you not waste time.

Jason, do you know how to determine what the equity is in a property, I can't find this answer anywhere on BP or online

Jason Hirko · Answer

@Jose Falconett There's always a way to make a deal work. The deal might just not fit in the 'I can wholesale his to a rehabber box.' Get familiar with other strategies and have an answer (and a way to turn it into a deal) for every situation.

Jose Falconett · Answer

@Jason Hirko I am basically trying to figure out the equity for when a seller calls me and has not a clue as to how much they owe, their interest rate, their monthly mortgage payment etc. so that I can determine if they have enough equity in a deal to make a deal. Basically I can't offer say 50k if they owe 100k and I certainly don't want to go through inspection, putting under contract, just to come to this conclusion in the end.

The only advise i've gotten was to look at public records which gives this limited info. The other was to look at a sellers payoff statement which takes about 2 weeks in mail.

Can you tell me your procedure as if a seller called you and you had to determine if the property had room to make a deal?

Jose Falconett · Answer

@Jason Hirko Thanks, so when evaluating properties for equity on the phone it is basically a historical educated guess.

Knowing that now, do you have a link to a good amortization schedule calculator to plug in said averaged interest rate and the principle given on the mortgage note from public records. (trying to find out how most investors filter leads that don't have equity).

What interest rate do you assume sellers have on their mortgage?

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