You Can Borrow From Your Real Estate Note...
There are many different reasons one might want to pull money out of a mortgage note. For every need there are several different options that might help.
We are going to discuss a few of these options for you here...Option 1:- One rather standard option is to trade the next "X" number of payments for a cash lump sum now. This is something that we can arrange for any situation and will give you cash now for your immediate need and still leave your investment intact.
The payments we pay for are mostly interest so even if you trade us 2 or 3 years of payments for a lump sum now the principal balance of the note will hardly change! You could be trading $2,000 in principal for $10,000 now!
Option 2:- Perhaps you are thinking about the need for those payments right now. If you cannot do without the payments on your note for the next 2 or 3 years or whatever time would be needed to satisfy the money need then there is another option.
We can give you the cash you need now in return for the middle payments on the loan or for the last payments on the loan.
That’s right, we will give you cash now and wait for our return down the road. The results to your principal and total received will still be similar showing a very small loss if any of your principal.
Option 3:- Now perhaps you have payments at this time of, say $1,055.00 and you have a rent payment of $525.00 each month. You use part of the note to take care of your rent. This is a smart thing to do and a wise use of your cash flow. If you sell the note now for cash you will not have that money to pay your rent.
You still have that need now however so there must be a way to get it without paying the bank interest right? The structure we can use here is often referred to as a "split payment" in our industry. We will buy half of any number of payments from you to be able to give you the cash you need now!
Call us today and let us know your need so we can provide you a solution!
Comments (4)
Was not asking about a "standard" discount, but due to the economic conditions today what the "average" discount has been on the good sellable notes that are being "traded" today. From what I know, as a notefinder for the notebuyers, you are seeing that discount whcih used to be 5-10% has now gone up to 20-40% at least. Have you considered offering the noteholder a series of, say 6 monthly installment purchases which would tend to increase his total yield to almost 100% while it keeps the risk to you down.
Jim Wineinger, almost 15 years ago
Dear Jim: Thank your for your comment. We're always asked what the standard discount is on a note. What we look at is our Yield On Investment (YOI) of a particular note, so there is no standard discount, as such. Let me give you two examples on the same SFR-Owner Occupied property: Assumptions: Buyer FICO score is 650-700, 20% down payment... Example #1 Original Note: $100,000 Interest Rate: 8.5% Term: 180 months No Balloon Seasoning: 12 payments made on time Note Balance: $95,550.81 YOI needed by investor: 12.0% Full Purchase Quote: $77,070.66 Discount: 20.2% Example #2 Original Note: $100,000 Interest Rate: 8.5% Term: 360 months No Balloon Seasoning: 3 payments made on time Note Balance: $99,816.97 YOI needed by investor: 15.0% (due to short pay record and longer term) Full Purchase Quote: $57,789.21 Discount: 42.1% As you can see, with the short seasoning and the longer term on the second example, the investor wants a higher YOI due the risk and future value of his/her investment over a longer period of time. The key to this is that anyone wanting to take back a seller financed note should get advice from a note investor such as ourselves so the note is structured properly for maximum cash if sold. Unfortunately, of the millions of dollars of notes out there today, we estimate that only 7% are quality notes that would receive maximum cash out. In today's volatile mortgage market, foreclosures and falling property values,the days of the 5-10% discounts are over. In the above example #2, the difference between a well-seasoned note and one with a shorter term cost the note holder over $19,000, or 25%. A down payment of only 10% would have also lowered the notes value. Jim, I hope this helps. There are a lot of variables an investor looks at when quoting a purchase price. Steven Hammons
Steven Hammons, almost 15 years ago
youve presented three great optins here. im planning to choose one. it appears to work.
fredney dizon, almost 15 years ago
interesting concept, but what is the approximent discount that you are seeing right now on notes.
Jim Wineinger, almost 15 years ago