Note Investing
Mortgage notes can provide safe and predictable returns for investors. Even if the stock market fluctuates or if interest rates change, returns can be locked in and provide very safe monthly income.
Basics
When considering a note purchase a critical risk evaluation is the note balance compared to the current value of the property. This ratio (Loan-to-Value Ratio, or "LTV") gives a quick assessment of a note's risk as the lower the LTV, the less likely a borrower is to walk away from the property or discontinue making payments.
A second risk consideration is the current financial profile of the borrower. The more income a borrower has relative to the monthly payment, the better. A quick way to evaluate that risk is to look at all the borrower's monthly obligations, including the mortgage payment, as a percentage of gross monthly income. That comparison is commonly referred to as a Debt-to-Income Ratio, or "DTI".
There are many more important risk assessments needed before you purchase a note, such as:
The condition of the property,
- The trend of property values in the area,
- Occupancy of the property,
- The purpose of the loan,
- The age of the loan,
- The guidelines used in originating the loan,
- Counter-party risk.
Operationally, the following are important items:
- Collateral and assignments,
- Cash flow pricing to reach target return,
- Loan servicing.
Having an experienced professional can greatly assist in making the right decisions.
Investor Purchase Program
We are currently working with a mortgage originator that can deliver 8% note rates to investors. These loans are made to borrowers after an evaluation is done relative to their income, debts, and assets. Additionally the properties are fully vetted relative to their current value. An important aspect of this program is that it requires the borrowers to have at least 30% equity in the property. Typically the LTV ratios are 60 to 65%, providing a high degree of principal safety.
This mortgage originator will sell notes and continue to collect the payments from the borrower and remit them to investors on a monthly basis. Investors can receive reports on the amount and timing of each payment so they can stay on top of the investment. If additional work is needed the mortgage servicer will handle it.
If you would like to find out more please contact us at info@WholeLoans.com.
Disclaimer - This is not an Offer to Purchase or Sell Securities. This overview is for informational purposes and is not an offer to sell or a solicitation of an offer to buy any securities