Stabilizing Rates Make It Time for Seller Funded Mortgage Notes |
| Compared to working through a financial institution, seller held mortgage notes, deeds of trust and other seller-funded instruments have several advantages. When times are bad, as they were through 2008 and 2009, seller funding allows you to fine tune a mortgage for a specific borrower, bypassing some of the problems in the market. |
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| Even when the housing market as a whole suffers a surplus supply, the supply of tailor made financial arrangements is smaller. Nevertheless, the prevailing market still matters, which is why indications that mortgage rates are stabilizing and getting ready to rise are encouraging signs for anyone interested in seller funding. |
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| Stability doesn’t mean we won’t see the odd surprise along the way, but that any changes won’t force a massive restructuring of the industry. Right now it looks like stability and inflation are primarily being driven by adjustments in Fed policy (namely, the upcoming halt in purchases of mortgage backed securities) but this is being backed up by ordinary Americans as they return to jobs and a forward looking perspective on finances and investments. |
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| The net benefit of this is that the field of potential borrowers is likely to increase. These people will want a mortgage note that not only fits their situation, but gets established before rates rise too high. |
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| Increased rates are welcome news for anyone considering private notes on several fronts. Obviously, the ability to set higher rates based on the prevailing market makes seller-held notes more profitable investments. There’s more to it than the straight profit potential, however. When rates increase, this provides more leeway to adjust terms for individual borrowers. |
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| In essence, a sense of stability brings the borrowers out, while rising rates represent an advantage for lenders, providing more flexibility and potential profit. Nevertheless, none of this gets rid of the basics of seller held mortgage notes. You need to investigate borrowers thoroughly, come to reasonable terms under the supervision of a real estate lawyer, and ensure that all insurance and paperwork are properly filed and organized. |
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| If you properly administer your seller-held mortgage note, you’ll avoid legal complication, remove any confusion about payment obligations and increase your options. One of these is the option to sell your note for cash flow. Get a mortgage note quote to see how you can convert a solid note into a sizable lump payment. |
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