Mortgage notes as investments Mortgage note

1 mortgage notes investments

1.1 importance
1.2 risks
1.3 investors
1.4 comparison other investments

mortgage notes investments

like bonds, mortgage notes offer investors stream of payments on period of time. mortgage notes traded on secondary market whole or part of mortgage-backed security. unlike bonds, mortgage note prices quoted percentage figure, e.g. 95 95%.

importance

in united kingdom, mortgage-related debt amounts on £1 trillion. in united states bond market, mortgage-related debt amounts $6.5 trillion , accounted 23% of market of december 31, 2006. $1.93 trillion of mortgage debt issued on bond market in 2006; gdp of united kingdom, , larger other debt category.

risks

the risks associated mortgage notes similar of bonds:

credit risk, i.e. risk borrower default
you foreclose , money back
prepayment risk (borrowers have call option, i.e. can pay debt early)

for fee, guarantors such fannie mae, freddie mac, , ginnie mae guarantee mortgage backed securities against homeowner default risk, reducing credit risk associated mortgage notes.

investors

mortgage note buyers companies or investors capital purchase mortgage note. if holding private mortgage, these investors give cash , take on receiving monthly payments being paid previous owner. mortgage note these investors home loans or mortgages secured real estate. mortgage notes $10,000 tens of millions of dollars.

note buyers can buy notes on type of property, though owner-occupied single family houses tend best pricing. note buyer offer price based on perceived risk factors, include amount of equity in property, payer s credit, type , condition of property , surrounding area, elements of note, etc. u.s.-based note buyers buy in 50 states, though advertise being able buy notes in canada.

comparison other investments

the advantage of mortgage note on other investmens mortgage note allow 1 collect interest on monthly basis. there no sales commissions or fees taken out of mortgage note investment.