With traditional banks pulling back from the mortgage industry in the wake of legal woes, revised banking standards and constant scrutiny, nonbank lenders are recognizing the opportunity. In fact, nearly a quarter of the loans that were processed in the first half of 2014 were made by nonbank lenders, according to Inside Mortgage Finance.
This is incredibly good news for many consumers, who were prevented in many cases from obtaining a loan by oppressive regulations and complex requirements. Now that Wall Street is back in the game and willing to show off a little American ingenuity, the result is an unprecedented opportunity for investors.
In the past, it was only permissible for an individual to have loans for 10 investment properties. It was not uncommon for me to hear from people who had worked extremely hard to build a substantial base of equity in their properties, yet the amount of cash flow they had coming in was sub-par and they no longer had an effective means of building wealth, since the banks wouldn’t lend them any more money.
Enter nonbank lenders and Wall Street to the scene, and what you have is a creative solution to a problem that has been around for quite a while. Simply put, this is a brand new product that is certain to have far-reaching implications.
It is now possible to bundle investment properties into one single portfolio, a personal Real Estate Investment Trust. There is no longer a limit to how many investment properties you can own. All properties and existing loans can be refinanced into one loan, allowing investors to expand their holdings, cash out equity and bring additional funds into the monthly coffer.
The best thing about these loans is that the personal financial situation of the investor is not under scrutiny. Yes, you read that right – the personal financial situation of the investor is not a factor.
Instead the value of the properties is used as collateral in securing the debt. What this means is a great deal more flexibility in acquiring financing and perhaps less of a need to sift through mountains of personal financial data, go on scavenger hunts for more information, jump through hoops, produce hair follicles or provide blood samples.
Since these loans are essentially considered commercial loans, the guidelines are not as strict and the regulations are not as stringent as with residential loans. Lenders are looking for places to put their money, and this provides investors with a pathway for purchasing additional properties and simplifying their lives by rolling numerous loans into one portfolio loan.
Many of these products are adjustable rate mortgages, with competitive rates and 30-year amortizations. The loan-to-value ratio can be up to 75 percent and the origination fees typically vary.
If you are interested in how this could apply to your unique financial situation, contact me by phone or through email and I’ll be happy to go over things with you. I enjoy helping people create effective strategies for building wealth and ensuring their dollar is working as hard for them as possible.
Patrick Stoy has 15 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.
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