Does pre paying on Mortgage increase our rates?

Question

I just came across this video on WSJ.

What stopped me was seeing that a PRE PAYMENT on a mortgage actually reduces the value of a note/mortgage to the investor on the secondary market.

If this is the case, wouldn't it follow that we need to pay higher rates to compensate an investor for that lower value?

Our rates aren't terrible but they've crept up compared to what we used to get, and we've been paying down notes pretty aggressively at times.

Any note investors out there care to weigh in?

Here's the WSJ article in question ---- it's a video and the content is around 2:10 and on.

https://www.wsj.com/video/how-...

Joe Villeneuve · Answer

All money that comes out o the REI's pocket, in the form of cash, represents a cost to that REI. When the REI adds cash to the principle, thinking somehow they are reducing the cost of the property because they are eliminating interest, is missguided at best. All you are doing is transferring cash from your bank to the floors and walls of the property it increases nothing other than the cost to the investor, and decreases nothing but the profit. It does increase the amount of time it takes to recover the cost...and thus start making a profit.

The question then is usually asked, "how is the cost increased when the interest is decreased"? The answer is twofold:

1 - There's a difference between total cost of the property and cost to the investor...and the only one that matters is the cost to the REI, because...

2 - ...the interest is being paid by the tenant, not the REI, because the source of the funds used to pay the interest comes from the tenant's rent...unless the REI is foolish enough to come out of pocket.

Does pre paying on Mortgage increase our rates?

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