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Mortgage Tips

 

Mortgage Buyers would like to acquaint you with our unique service to Owner Financed Mortgage Note Holders & Settlement Receivers. Mortgage Buyers is in the Business of Buying existing Real Estate Contracts, Mortgage Notes and Deeds of Trust, in the United States. We convert long term income into cash now. You get the cash in hand today that you wanted when you sold your property. We also work with Structured Settlements that dribble payments in monthly or have future payments pending; we can convert those payments into a lump sum today.

Ultimately, you are searching for security for your money or investments. Your immediate situation may not be fulfilling this for you. What service we would actually be doing for you, is giving you cash up front for the purchase of payments that you may never receive.

 

Discount Mortgage Fundamentals

 

Many people are not aware of the fact that a substantial number of Real Estate transactions are completed through seller carry backs. This is where the seller, rather than a bank or other institutional lender, provides the financing for the purchase. They do this through the carrying back of a note, which is secured by the property. Often times the seller will take a first lien, or priority position with respect to the property, although in some cases the seller has been forced to take a second lien position in order to help complete the transaction. Many of the purchasers who require seller financing are well qualified but have been unable to obtain institutional financing for a variety of reasons. This is particularly true in today’s economy where financial institutions have become increasingly stringent in providing financing to individuals.

The majority of these transactions are secured by residential properties; however, seller carry back financing is becoming more and more prevalent with multi-family and commercial properties. This is because institutional lenders have virtually stopped providing purchase money financing for such properties, even when they are well secured and the purchasers are highly qualified.

Over the past few years a secondary market has evolved for institutional investors who provide purchase money financing. Historically, these institutions were interested in holding the loan for the entire term, but as interest rates climbed in the late 70’s and early 80’s, these lenders suffered serious declines in the value of their loan portfolios because the yield on their loan was well below market. Accordingly, the financial industry has developed a secondary market for institutional lenders to resell their loans shortly after they are originated. This allowed them to avoid the financial risk of holding them on the long term basis, and it provided them with renewed funding for further lending.

Even with the evolution of a secondary market for the resale of purchase money loans made by institutional lenders, no organized secondary market has developed for seller carry back financing. In most cases, individuals holding paper would prefer to receive cash for their note, but they do not know how to accomplish this. Even those individuals who wanted to carry back the paper on a long term basis will have events that occur in their lives which might make it necessary, or desirable for them to sell their notes…

Simultaneous Closings

The phrase "Simultaneous Closing" is used to describe transactions that occur when the seller is carrying back a note, as payment for their property, with the specific intention of selling the note for cash. In other words, "Simultaneous Closing" just means, during an escrow closing, that there are two (2) separate closing transactions happening at the same time.

Documents are signed and:

     1. Buyer gets Title of Property & Seller Receives the Mortgage Payments

     2. We buy the Mortgage Payments from Seller for Cash - Assignment

The Advantage is the Seller gets Cash up front for payments that may never materialize. The buyer then pays us the mortgage payments. The Seller is then out of the transaction altogether.

Time Value of Money

This concept involves both the "cost" of money and "when" money flows in, or is paid out. Time value of money says that a dollar today does not have the same value as a dollar ten years from now.

Here are a couple good examples of the time value of money:

       1. Thirty years ago, a soft drink would have cost you a nickel.Today, you will probably have to pay closer to a dollar.

       2. Twenty years ago, you could have gone to see a movie for roughly one dollar. Today, you will pay around six to eight dollars for that same movie.

 

Future Value

The future value is the worth, at a specific point in the future, of an amount that is to be received or paid today. Through the process of compounding, a current investment will "grow" or increase in value over time. Consider this example.

A new $10,000 trust deed at 10% (per annum) interest with a one-year maturity will pay $11,000 at the end of one year. Thus, $11,000 is the future value of your $10,000 investment today…

 

Present Value

Present value is just the opposite of future value. It is the worth today, of an amount to be received (or paid) in the future. In the same example as above, the $10,000 beginning amount is the present value of the future $11,000 assuming that the investment is to earn 10% per annum.

 

Click here for a Glossary of Terms

 

 


 

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