Will an Early Mortgage Surge Drive Seller Financing?

As of the time of writing (June 29, 2009) it looks like the housing market is at a crossroads. President Obama and the Fed both say that the worst of the recession is over and the housing market is starting to respond – but that response might be a bit premature. Loan rates have surged this week, leading to a new worry: The investment sector's enthusiasm may exceed the average borrower's ability to pay. This top-down influence highlights the need for alternatives like seller financing.

The forces at work are complex, ranging from fluctuations in Treasury Notes (always closely bound to mortgages) to some recent maneuvers from the US' biggest creditors, including diversification away from the US dollar. Right now, the effect "on the street" is an interest hike for mortgages combined with an inflation spike driven by both foreign creditors' and the bailout's boost to the money supply. Unfortunately, this situation hasn't trickled down to employment and income levels, which remain stagnant – and which are, after all, the fuel that fires the entire mortgage industry.

The net effect of these influences means that mortgage rates are increasing out of pace with incomes: a bad situation for the average borrower, but an opportunity for anyone considering financing their own property's sale. As a private note holder you have the power to free borrowers from these forces by negotiating a mortgage note based on your needs as a borrower and the lender's unique situation. As long as you thoroughly investigate the borrower's credit and can manage the note effectively, you may be able to offer an alternative to increasing interest rates, but through a tailor-made instrument that makes it a worthwhile investment via balloon payments and other considerations.

Talk to a real estate lawyer, examine the market and look at your own situation. Remember, as long as you manage your mortgage note responsibly it can serve as immediate cash flow, because a note in good condition is one you can sell. If you want to know more about the cash potential of a current note, get a note quote from us. We'll be happy to help.