Calculate the annual yield you'll earn on a note purchase — or find the exact price to pay to hit your target return.
This tool is built for mortgage note investors who need to quickly calculate the yield they'll earn on a note — or back-calculate the maximum price to pay to hit a specific return target.
Yield is your annual return expressed as a percentage of what you paid. If you pay $65,000 for a note and it earns the equivalent of $7,800 per year, your yield is 12%. Yield is everything in note investing — it's how you compare deals and decide what to offer.
UPB stands for Unpaid Principal Balance — the remaining balance the borrower still owes. The difference between what you pay and the UPB is your discount. Buying at a discount is your margin of safety: if the borrower stops paying and you have to foreclose, you paid less than what they owe.
This tells you how much of the UPB you're paying. If you buy at 81 cents on the dollar, you paid $0.81 for every $1.00 the borrower owes. The lower the cents on the dollar, the bigger your discount and the more cushion you have.