How To Structure A High Yield Mortgage Agreement.
As a mortgage note holder you have control over how profitable your note is. You can add value to your owner financed note from the very beginning as you negotiate with a prospective borrower. Before any signing on the dotted line remember, you are in the ideal position of control. Use that position to insist on certain conditions and terms for your mortgage agreement.
First and foremost, you should request a thorough credit check of the applicant borrower(s). In my business I find a lot of note holders are apprehensive about requesting a credit report on a potential buyer. In fact many of my clients actually signed mortgage agreements without checking credit. This negligence put them at a disadvantage when presenting their note for a purchase offer.
The fact of the matter is that if a person or persons applies to you for credit they are in effect giving their consent for you to check their credit. This is the legal standard. Once a borrower signs a credit agreement the note holder should report the agreement and terms of the agreement to the appropriate credit bureau. This benefits the note seller because you then have a right to review that borrower’s credit report periodically.
This Levitra will help you keep up with any issues that may effect the repayment of the loan. These inquiries will not effect the borrower’s credit score. They will be interpreted as ‘soft pulls’ by the credit bureau because you are a lender listed on the borrower’s credit report
Once you acquire the credit report you should insist on a minimum score of 625. This figure is considered an average credit score. If your note has a balloon payment the credit score should be at least 700. The reason being, an owner financed borrower will almost always seek traditional financing sources to meet the balloon payment obligation. Those lenders will require a minimum 700 credit score.
The most obvious reason to check credit on a borrower is to measure their financial reliability. You will be able to determine the likelihood that they will pay as agreed, on time. Once you know the credit score of your potential borrower you can structure the terms of your mortgage agreement accordingly.
Interest rate is a key element. The interest rate charged directly effects the amount you will earn over time as payments are made. It also effects the value of your note to a note buyer. A higher interest rate (7-10%) will net more dollars for you while you are receiving payments. It will also net more instant cash for you should you decide to sell your note. The note investor’s reasoning is that a higher interest rate will garner a higher investment yield over time.
The down payment is another very important condition. In theory the more money a borrower is wiling to invest toward a financial obligation the more vested they are. Certainly it is less likely they will default on the obligation. As a note investor I always consider the amount of the down payment when I consider a land contract for purchase.
A value based, stable mortgage agreement should have a minimum 20% down payment. One other advantage to a significant down payment is that it goes directly toward the principal balance of the property’s purchase price. This results in the loan amount being less. The lower the loan amount the higher the loan to value.
Loan to value is a factor that note buyers look at when determining how much they will offer to buy a note. Loan to value is simply the amount that is owed or the amount of the note, divided by the actual property value. Ideally loan to value should not exceed 80%. If the loan to value of your owner financed note is in excess of 80% , the purchase offer value decreases. In essence the down payment has a ripple effect on the overall value of the mortgage note.
The last and by no means least important factor is Term, or the measure of time allowed for repayment of the loan agreement. From a note buyer’s perspective a shorter term on a note will demand a higher buy price. This is true for two reasons. The first is that payments spread out over a long term have increased potential to default. The second and more prevailing idea is called the time value of money. Simply defined the time value of money is the value of money figuring a given amount of interest earned over a period of time.
If you consider inflation and the declining dollar you must agree that the longer one has to wait to recoup an invested dollar the lower the value of that dollar. We have a saying in our business, ” a dollar today is worth more than a dollar tomorrow.” All said the shorter the term , the safer , higher yield proposition to you the lender, and the potential note buyer. Whether you sell your note or keep your note, using these tips can help you get instant cash or a stable, long term financial advantage
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Get top dollar for your Real Estate Mortgage Note today.
Becoming a Real Estate Investor
Back in 2003 we wanted to begin investing in Real Estate here in the Columbus area. We looked into several Single Family Properties and came close of making our first purchase on a $100,000 home. But we didn’t jump in at that moment, we see a condo right around the corner from there for a third of the price. It was a 2 bed room and 1 bath unit with basement. Kamagra jelly We made a lower offer than what they were asking and purchased our first property.
Our game plan was to get this one ready to rent and then look for the next one. We did just that and within a year we had purchased three properties. All got purchased below what they were asking, each one took some rehab work but all rented out quickly and cash flow very nicely.
But to make a long story short, I purchased three real estate properties within a year and had depleted my cash funds to make the next purchase.
I joined the local Real Estate club in town, and looked at all the real estate options that I could find to see if there was a way for me to keep moving forward in the rental business.
Scott Gordon 614-419-3077 SRG Property LLC, – We Buy NotesSRG Property LLC – Who We Are
We are a private investor/independent broker. We deal with many investment groups both private and institutional. These groups each specialize in buying only certain types of notes. One particular group may prefer to buy residential real estate notes and another may only buy annuities. We have learned through experience which investors will give you the best prices for your particular cash flow. We will analyze and package your cash flow to make it appealing to these select groups.
Since I am also a private investor, I may decide to buy your note for my own portfolio and would offer you competitive pricing. I am very professional in my business dealings and will do my best to provide you with complete customer satisfaction. You will receive my personal care and attention. I believe that hard work and good ethics are the way to success. I am confident that you will not be dissatisfied with your decision in doing business with me.
Whether you’re serious on selling, have a few questions or just want to “check out your options” … our sole purpose is to be at your service. We look forward to earning your trust and helping you achieve your goals.
Scott Gordon 614-419-3077SRG Property LLC -We Buy Notes
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