"leveraging" Is Not Possible For Me (?)
I am experiencing a frustrating situation here. I keep hearing about leveraging and taking out equity in properties I control in order to purchase other properties etc. But when I actually try and do this ,the banks shut their doors in my face. A perfect example was this ....I have a home worth 700K with 375K remaining on a mortgage.... I wanted to open an equity line of credit of about 100K-150K in case I ever need it. Right now I am "retired" and do not earn a paycheck. When asked my monthly income I estimated 80K ( since thats about right as I liquidate other investments I have made in the past over the next year or so. ) The bank asks me these questions and then says that since my income is only 6600.00 per month and my existing home mortgage is 3200.00 per month and since they only loan what you can afford to pay after 50% of my salary is deducted for my existing mortgage, that they can only issue me a 12K line of credit ,because there is only $100.00 a month left over after 50% of 6600.00 ( 3300.00) is left after the 3200.00 mortgage payment is made. This make sense to me from where they are coming from ,but how does one ever leverage themselves if all the bank wants to know is what your present income is in order to write the loans ? I mean, its like the only way I can get a 100K line of credit is if I were already earning 150K a year. (and what good is that ) When I keep hearing about people who refinance and pull equity out of properties they control in order to leverage and buy additional properties it sounds great but I cannot imagine how they are pulling this off. Where are they finding the lenders who are willing to accept the equity ( and the equity alone ) in a property as adequate collateral and not care about the income you earn. I realize that the interest rates will be higher , (but who cares ) The banks I have been talking to want you to already BE a millionare before they will loan you any money. What am I missing here ? From listening to everyone speak at the TCI convention in Orlando and then being faced with the reality of the lenders I ask this ........ Do I have to finesse a banker to get an investment loan the same way as you have to in order to find one willing to do a "short sale" with you ? All the wonderful investment/leverageing plans that I hear about always just casually state "borrow money on the equity you already have" as if THIS is the easy thing and then put your plan into action ,I am finding that I am "dead in the water" right out of the gate ,because I cannot find anyone willing to loan me any money based on the equity . I already have ( since I cannot show vast income right now ) Any advise would be greatly appreciated ,, Thanks DH
stated income works. no W-2 or 1099's to show.
Stated is one option but that probably isnt your only option...... Stop talking to banks and go find yourself a mortgage broker that can shop around for you and find a good deal..... with that much equity it shouldnt be much of a problem.
B
I sent you a PM with some specific suggestions.
A general idea that I want to share with the group is:
Avoid loans. Look for seller financing opportunities and then use the equity you have to secure the seller's note. Then you can apply for a new mortgage on the property you are buying with a conservative LTV.
In all situations where you want to borrow money you will need to have the income to support the debt service. As noted you can go the 'stated income' route.
The bottom line is you need the income to service the debt. Otherwise the equity is not that useful.
You could consider selling the property with the equity and then using the cash to invest in property or notes that provide better cash flow relative to the value and the equity. I sold one place that would never rent for what it was worth but I could move the funds to 3 other units that have been ratios. The one I sold had gone up really well (specific circumstances) so it made sense to extract the equity and redeploy it.
John
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Find a good mortgage broker you can work with. He can give you better advice regarding your specific situation than we can. And he has access to more lenders.
Except for the bak where I have a good working relationship with the BP I never use them.
USe a broker, in fact use several! There are at least 50-10,000 lenders and a broker only uses about 5-10 on a regular basis so SHOP AROUND
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