Top 3 reasons why selling your note now makes sense.
Every day I speak to mortgage note sellers about selling their deeds or land contracts, and the conversation always turns to the rising interest rates. It is on many people's minds in the real estate industry. 'How will it affect my mortgage note' is a common question. Let's dive into it.
1. Your borrower may not qualify to refinance and maybe they will not want to. If you wrote their note at an interest rate, like 8% or lower, their incentive to refinance is much lower. At the time of this being published mortgage rates are at 5.75 and are expected to increase a few more times before the end of 2022. So the longer you hold onto your note, the lower are your chances of a full payoff.
2. If you are a real estate investor, fix and flipper or doing buy and holds, your cost of borrowing money is going up. Banks and hard money lenders are increasing their interest rates to keep up with the market. So if you didn't already secure your HELOC, the numbers might not make sense for your yield. Tapping into the cash locked in your note is a pretty good option. Especially if you wrote the note at a low interest rate. Your next deal can be written at a 10-12% interest rate, which is very common for seller carry back loans.
3, Your money is worth more now than it will be in the future. Here is an example that we can relate to: how far would $100 go at the grocery store today compared to 20 years ago? The basket wouldn't be nearly as full, right?
If you take your cash today instead of monthly payments your money will be more valuable. Especially if you use it wisely!
If you want to ready more about the current interest rate situation, here is an article.
For a free no-obligation quote on your mortgage note call Sand Dollar Notes 559-648-3669 or fill out the Online Note Quote.
April Banda
april@sanddollarnotes.com
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