Don’t sell your mortgage note now… unless you are in a real or urgent need for money.
As this is written in the early summer of 2022, the Federal Reserve has moved aggressively to increase interest rates… The expectation is a total 1.75% interest rate hike in 2022. And there are more interest rate hikes coming.
If you’re thinking of selling your real estate note, keep in mind that mortgage note prices tend to act like bond prices. When interest rates are low, bond prices are high, the same with mortgage sales prices… they are high. When interest rates are high, bond prices are low, the same with mortgage sales prices… they are low.
Therefore, in an increasing interest rate environment, bond prices and mortgage note prices will decline.
Unless you have an immediate need for the cash, and you can’t wait two or three years for interest rates to come back down, don’t sell your mortgage note now.
However, if you do need to sell your mortgage note now, let’s review how the value of a mortgage note is determined. As this is a risk reward-business, we need to determine how much risk we will take if we purchase your mortgage note.
There are four factors to evaluate.
First, we look at the borrower. How does the borrower handle his financial obligations? Are we going to get all our payments on time? Or does the borrower have a spotty track record in meeting his financial obligations. If the borrower is unreliable, there is a much larger risk for us.
Next, we look at the property, that is the collateral for the promissory note.
We rank the desirability of the collateral. The most desirable mortgage is the single-family owner-occupied house… followed by the single-family investor property, commercial property, land, and business notes.
The single-family owner-occupied property is the most desirable, as even people with good credit can face a financial challenge with more bills than they have money. Generally, the house payment is the last payment that they’re going to let go… as they need a place to live. While defaulting on the other types of collateral, while not desirable, doesn’t cause the same level of pain as losing the house you live in.
Continuing with our evaluation, how much does the borrower have at risk in the event of a default. The more equity that he has, the more likely it is that he will not let this mortgage note go into default.
Next, we look at the terms of the note. What if the term of the note, the interest rate, the monthly payment… is there a balloon? How many payments have been made and how many payments are left? What is the unpaid balance of the note?
Then we take all these factors and determine how much we would be willing to pay for the mortgage note. Finally, looking at our worst-case scenario… in the event of default… would we be happy to own that property for what we are paying for the mortgage note?
If you want to sell your mortgage payments now, know that we have over 30 years’ experience in buying real estate notes. We will help you to get the most money for your mortgage note regardless of the interest rate environment. So, before you do another thing, to free up money locked in a mortgage note click here and fill out our confidential form and we’ll get to work to free up your money.
If you’d like to speak with someone before submitting your note information, just give us a call today at (772) 232-2383. Or, to get started click here and fill out our short confidential form.
You can also check out what other note holders have said about dealing with us by clicking here. And, check out our Google 5 Star reviews here.
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