I have a real estate note which has a very low interest rate of 4%. Is there a note buyer who will buy this note?
Yes.
I am happy to purchase a low interest rate note.
The interest rate on the note you are receiving payments on does NOT affect the
ability for a note buyer to buy the note.
A note with ZERO interest rate is easily purchased by a note buyer.
Keep in mind, that the lower the interest rate, then the bigger the discount
will be to sell your note.
example: A note with a 11% interest rate will sell at a much smaller discount than
a note with a 4% interest rate.
Also keep in mind, that the interest rate on the note CANNOT be changed unilaterally by the note holder.
A lot of people think that if they sell their note, the new note holder will raise the interest rate?!?!
The terms of the Promissory Note cannot be willy-nilly changed at the whim of the note holder. (Your bank can't call you up in the middle of the night and say, "Since I am losing money, I am raising your note interest rate to 13.5%.")
So, there are many factors that affect the value of a note - Interest rate is just one factor involved in the value of a note.
A low interest rate will mean the note is less valuable than a similar note with a higher interest rate.
But, a note with a low or even a zero interest rate certainly can be sold.
Labels: low interest rate, note with low interest rate, promissory note
