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Author Topic: Why not buy notes with a premium???

j
  • Posts: 1
Why not buy notes with a premium???
OP: October 11, 2017, 11:00:00 PM
I've been investing with LC for a while, and just recently started to think about trading notes on Folio.

I was thinking of buying 60 month notes with 12 - 18 payments left, filtering them to ensure they have never been late and have not dropped credit rate.  My thought is that if they haven't defaulted in the first 4 years and their credit is stable, there is a high probably they will pay off the loan.

The one question I have is why do I see so much advice to not pay a premium.  My thoughts are the premium gets rolled into the yield to maturity, so if I can get a higher yield, I should still be ahead.  What am I missing?
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T
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Why not buy notes with a premium???
#2: October 11, 2017, 11:00:00 PM
Yes, that makes sense.  I wonder how often that happens deep into the loan. Thanks.
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T
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Why not buy notes with a premium???
#4: August 20, 2018, 11:00:00 PM
I wondered about this as well.
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m
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Why not buy notes with a premium???
#5: October 05, 2018, 11:00:00 PM
It’s true you can lose the premium paid if a note pays off early, but is it more important to try to minimize a 3% loss from a prepayment, or a 100% loss from a default?
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