Reverse mortgages are becoming more popular as more seniors are discovering their benefits and as companies like Senior Lending Network are out there spreading the word. There are a few cons that you need to take into consideration before getting this type of loan:
Reverse mortgages cost more than regular loan especially when you consider that the loan balance increases over time. The unpaid interest is tacked on to the original loan amount each month each month so the end amount owed increases dramatically over time as the interest compounds.
Because the loan amount increases over time, it will decrease the equity that would otherwise pass to the homeowner or their heirs.
Interest on reverse mortgages isn’t deductible on your tax returns until the loan is paid off.
I just came across this video from the folks over at Portland Real Estate. It should give you a bit of a laugh despite all of the craziness out there. Check it out:
Are you wondering if this will ever let up? If you have any opinion, leave a comment below. Also, take a look at a few other articles on the subprime crisis:
- Assembly Republicans turned their backs on their constituents today with heartless votes against a package of bills designed to offer assistance to homeowners struggling to pay their mortgages, said Assemblyman and Democratic Assembly …
- http://network.nationalpost.com/np/blogs/tradingdesk/archive/2008/05/06/dumb-subprime-lenders-and-investors-should-not-get-help-warren-buffett.aspx. “Capitalism without failure is like Christianity without hell,” Mr. Buffett said. …
- NEW YORK — Federal authorities, responding to the subprime-mortgage crisis, have formed a task force to determine if lenders or Wall Street firms participated in fraud. The task force will be headed by prosecutors in the Eastern …
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- The point that seems to stump them is why a relatively small percentage of subprime mortgage defaults has led to a spiraling national credit crisis, how it happened, and where do we go from here. They were good questions, and if you are …
Tags: subprime, mortgage, bad credit, economic recession
During this time of upheaval in the mortgage industry seeing hundreds of companies go out of business, it is ever important to keep your pipeline fresh and full of leads. What that usually means is going out and beating the bushes hoping to drum up business or relying on shady companies that sell leads to dozens of other loan officers.
I have been down each of those roads and neither of them are very fun! You need to have a mechanism to generate business on your own so that the leads are exclusive to you and only you. Now there is a learning curve to doing this and it took me a couple of years to figure it out and now I’ve decided to set these systems up for other loan officers (as long as they are competing with me directly). I won’t go into a lot of detail here but head over to www.ebrandsunlimitedllc.com and check it out for yourself. . .
This current version of the subprime home mortgage fallout has been interesting to track. Now that we are facing an election year, the politicians are coming out of the woodwork with promises to help ailing home owners.
With billions of dollars in mortgages set to adjust in 2008, many people are in panic mode trying to figure out what to do. Many will be able to refinance with fixed rates since they are still relatively low. Others, who aren’t as fortunate, will be facing some tough options if the government doesn’t come to the rescue.
Those options are brought on if you don’t have the credit to get favorable refinancing terms and/or if you are currently behind on your mortgage. They are:
Foreclosure - This means you have given up on the house and will let the lender pretty much have it. There are circumstances where, financially, this may be the best option. Emotionally this is a very difficult option.
Get a Foreclosure Bailout Loan - This option comes with it’s own set of problems and given the problems in subprime mortgages, the most difficult to pull off.
Sell the house - If you have enough equity, you may be able to sell the house via traditional methods. You also need to have the time if you are currently behind. The other way would be to have an investor negotiate a short sale on your behalf.
All 3 of these options have there own pitfalls and benefits so make sure you look at your financial situation closely to determine if you will keep your home or if circumstances require that you let it go.
Tags: foreclosure, foreclosure bailout loan, short sale, subprime
By know you have all heard about the meltdown in subprime mortgages. Foreclosures are on the rise and home prices have dropped in many areas across the country. The number of real estate investors in the market have fallen considerably as many of them have lost their shirt buying homes at the top of the market hoping the prices would keep going up.
Now there is a new sheriff in town, so to speak. All of the novice investors are gone leaving room for the seasoned vets to play the market again. Being a bit contrarian in nature, I see lots of buying opportunities out there IF you know what you are doing. Many markets are also seeing increased rents as would be buyers put off that home purchase and people that have lost their homes are subsequently renting.
This makes for an interesting buy and hold opportunity for the right properties. Part of determining the right opportunity is the type of financing you have in place. There are still a lot of options for real estate investor loans despite the fact that mortgage companies have tightened up their credit policy.
Real estate investor financing options include:
95-100% Financing - This option has almost completely disappeared due to the amount of foreclosures that resulted from it but it is still available in limited situations.
Investor Pay Option Arms - Here is another loan program that has gone into hiding that allowed investors to double or triple their cash flows.
Investor Rehab Loans (Hard Money Loans) - This little darling of a program is meant for all you that enjoy flipping houses. The underwriting guidelines are more flexible and fundings are much quicker. Hey you could eventually get your own TV show if you do enough of them! LOL
This is not a complete list by any stretch of the imagination but I also didn’t see the point of listing 101 variations of investment property loans when they fall under a few general categories. Next time I’ll dig a little deeper into specific guidelines such as how to get a loan with no title seasoning, etc. I will also go over some examples of how the financing can, and should, play in the decision of whether you should buy a property or not. Stay tuned.
Later
Tags: Investment Property Financing, Real Estate Investor Loans, Hard Money Loans, Investor Rehab Loans
Hard Money can be a quick way to fund everything from residential property, to industrial facilities, to new home construction. I will not get into every aspect of hard money but I will offer you a general frame work that your brain can grab a hold of.
First of all a majority of hard money lenders will allow you to borrow up to 65% of the value of the home. If the loan is for rehab purposes, they’ll use the “after-repaired value” of the property as the basis point. I have seen, on occasion, that number as high as 75% but 65% is the norm.These loans are very situational and very flexible so there is some wiggle room if the deal works. It may be a strike against you if you are new to the game but fortunately that can usually be offset with adequate reserves and a good plan of action.
Let’s say you come across a beat up old home in a good neighborhood where homes sell for $100,000. The seller walks you through the home and you determine that the property needs around $12,000 in work. You’ve gotten pre-qualified for a rehab loan and know you are wondering what the maximum you should pay for the house.
Lets keep it basic, you want to take $100k x 65% - loan costs – repair costs/holding costs = Purchase price. Loan costs, for hard money loans, run from 8-13% of the total loan amount. They are not inexpensive but it’s less money than you’ll pay to a partner! For now we’ll assume costs of 10% and holding costs of $2,000. Given those numbers, you probably shouldn’t invest more than $45,000 for the property. If you decide to pay more, that just means more money out of your pocket to complete the project.
Here are a few quick tips you can utilize to maximize the likelihood of being approved for hard money loans, in general:
The more equity in the property after the loan, the better,
The higher your credit score, even better
The more credit history you have, the better!
The more liquid assets you can show that you have personally or have guaranteed access to (lines of credit, partners, rich uncles. . .) the better
The more populated the area, the better
The faster the properties in that area sell, the better
The more solid the appraisal value, the better! A lot of hard money lenders like to use fire sale values as the basis point of the loan so don’t be stunned. This is definitely not the time to use inflated values.
All in all, this is a numbers game. Do not allow yourself to get attached to a property if the numbers don’t benefit you. Hard money lenders can be flexible but present them a deal where the numbers don’t add up and it could cost you a crucial relationship for future investments. Credit doesn’t always matter but it does help, tremendously, if you can show good credit history.
Tags: hard money loans, loans, real estate investing, foreclosure, mortgage, lender
Mortgage cycling can be a relatively quick way to pay off your home loan. However, there are a few caveats that you need to be aware of if you intend to use this method of equity acceleration. I have posted a quick tutorial on some of the basics but for more information, please visit our mortgage cycling page.
Throughout the years you have somehow managed to keep up with the payments on your home mortgage and now
you are looking to do a bad credit mortgage refinance. Even with a worse credit rating then you had you still need the money you are seeking. Here is the answer for you!
tags: bad credit mortgage, mortgage, home loan, loan, refinance, personal finance
If you are the type of investor that likes to hold on to property for cash flow, there is a loan type that when used correctly can maximize your revenue. It’s a bit controversial but, again, can dramatically increase the cash flow on your property. Take a look at the video below to get more information:
There are many advantages to refinancing your mortgage. Such as tax benefits, lower rates and debit consolidation. You can decide which is right for you.
