The numbers · Note yield calculator · Cashflow
Yield is manufactured at the discount.
The payment stream is fixed the day the note is signed; the only lever left is what you pay for it. Price a performing note to the basis point — and see what the collateral covers if it stops performing.
Inputs
Unpaid principal balance$120,000
Note rate (face)6.00%
Remaining term22 yrs
Balloon due innone
Your price (% of UPB)80% · $96k
Target yield12.0%
Collateral property value$180,000
Performing-note math: yield is the IRR of the payment stream (plus balloon, if any) against your price, solved to the basis point. Non-performing paper is a different business — you're pricing the workout, not the coupon.
The trade, in dollars
Face (UPB)
$120k
Your price
$96k
Discount
$24k
Collateral value
$180k
Payment stays $820/mo no matter what you pay — the discount is the only lever that moves your yield above the 6.00% face rate.
Yield at your price
8.7%
Face rate is 6.00% — the 2.7 pts above it came from the discount
Price for target
$76k
63% of UPB hits 12.0% exactly — your maximum bid
Investment-to-value
53%
Your basis vs. the collateral — under 65% survives a foreclosure sale
The verdict
Don't pay this. At 80% of UPB the note yields 8.7% against your 12% target. Your number is $76k — 63% of UPB. Bid there and let the seller decide; the discount is where your yield is manufactured.
Monthly payment$820
Discount captured$24k
Cash yield (pmt/price)10.2%
Equity cushion$84k