“Seasoning” is the term used to describe the amount of time the payer has been making payments. The general rule of thumb is the longer the better, with 12 months or more optimal. That is not to say that a note won’t be sold unless there is a lot of seasoning. It just means the investor will be looking at other variables of the deal that minimize risk. … [Read more...] about What is Note Seasoning?
Note Buying Blog and Articles
What Changes for the Payer?
"So if I sell my private mortgage note, what changes for the Payer?" This is a common question with a simple answer. Nothing changes for the payer except where they mail the payment. When a note is sold, the terms of the note remain the same. The payment amount, interest rate, and due dates remain the same. If there is a balloon payment or “bump” payments, they also remain … [Read more...] about What Changes for the Payer?
The Fair Credit Act
One question that is continually posed in this business is whether a cash flow investor has the legal right to access a person's credit file prior to purchasing a debt instrument. The rights of consumers are protected under The Federal Fair Credit Reporting Act ("Act"). Originally passed by Congress in 1970 and substantially overhauled in 1997, the Act regulates acceptable … [Read more...] about The Fair Credit Act
Broker Fees – Too Much or Not Enough?
Negotiating the purchase of a cash flow is about providing a service to sellers desiring cash rather than payments over time. While providing an essential service, the cash flow industry is also a for profit business. Cash flow brokers earn their profit through fees or spreads resulting from the difference between the price the seller agrees to accept and the amount … [Read more...] about Broker Fees – Too Much or Not Enough?
What is “Face Rate” of a Note?
“Face rate” simply refers to the interest rate that is being charged on the note. Typically seller-financed notes are written between 8 percent - 12 percent. The higher the interest rate, the more valuable the note to an investor. … [Read more...] about What is “Face Rate” of a Note?
What is Seller Financing?
When a seller allows a buyer to make payments over time for the purchase of property, it is known as owner financing or seller financing. … [Read more...] about What is Seller Financing?
Owner Financing? The Top 5 Things to Consider
When sellers provide owner financing, their primary concern is usually, “How do I make sure the buyer will pay me?” … [Read more...] about Owner Financing? The Top 5 Things to Consider
What is a Note Discount?
This is usually the first question on everyone’s list. “Discount” is essentially the difference between how much is currently owed on the note versus how much the investor is willing to pay for it. … [Read more...] about What is a Note Discount?
What is LTV and ITV?
You have probably heard a lot of acronyms thrown around in the note industry. Many have to do with note values and calculating price. Including LTV and ITV. LTV - Loan to Value LTV stands for Loan to Value. This is shown as a percentage. LTV tells note investors how much the buyer or payer owes against the property. It helps answer an important question based on the … [Read more...] about What is LTV and ITV?
How to Determine “Value”…
One of the considerations when purchasing a note will be the appraised value of the home. Although there are some great programs on the internet that aid the average consumer in getting an idea of a value, they are not always accurate and thereby credible when you are talking about investing money in a seller financed note. … [Read more...] about How to Determine “Value”…