Loan Sale Discount Calculator

Loans sell at discount to face. This calculator sizes discount and yield.

UPB

Purchase % of UPB

Expected recovery %

Time to recovery months

Annual yield

25.85%

Purchase price

$5,525,000

Expected recovery

$7,225,000

How the math works

Purchase = UPB × purchase %. Recovery = UPB × recovery %. Yield annualized over recovery period.

Loan sale yields that look above 20% annualized usually assume clean recovery paths. Budget 15-25% of gross recovery for legal, asset management, and broker fees. Net yield on non-performing purchases typically lands 8-15%, not the headline 25-40%.

How to Use

Enter unpaid principal balance.
Enter purchase price as % of UPB.
Enter expected recovery %.
Enter time to recovery (months).
Read yield and discount.

Frequently Asked Questions

Typical discounts?

Performing: 95-100% of par. Sub-performing (30-60 days late): 80-95%. Non-performing (90+ days): 50-80%. REO/deficient: 30-60%. Collateral value below debt: 20-50% of UPB. Discounts reflect expected recovery plus time value.

Buyer strategies?

Hold to maturity (bet on performance return). Modify + hold. Foreclose + re-sell property. Broker deed-in-lieu. Each has different recovery timeline and expected value. Strategy drives discount required.

Yield calculation?

Expected recovery ÷ purchase price, annualized over expected hold. High-discount notes often show 20-40% gross yields on paper; factor in expenses, legal, and collection costs — net yield typically 10-20%.

How do I benchmark this?

Benchmark against industry data from NCREIF, IREM, Yardi Matrix, CoStar, or RCA. Institutional operators also benchmark internally across their own portfolio to identify operating outliers. A single number means little; the trend and the peer comparison mean everything. Run quarterly benchmarks and note deviations that exceed 10% — those warrant investigation.