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Tax Liens & Mortgage Notes

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John Lowe
  • Real Estate Investor
  • Chicago, IL
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Do loan variables affect note valuation?

John Lowe
  • Real Estate Investor
  • Chicago, IL
Posted Jan 1 2015, 08:30

I understand that the value of a note is a function of the collateral, borrower profile, seasoning, etc. My question is about the structuring of the loan variables affecting the price. Specifically, a note made with a higher present value and lower interest rate vs a lower present value and higher interest rate. For example:

pv = 99k i = 4% n = 120 pmt = 1000

vs

pv = 79k i = 9% n = 120 pmt = 1000

If a note's value is reflected in the computed yield, then pv and i should not affect price. Is my thinking about this correct or am I off base? 

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