Get ready for new mortgage changes that will improve your pocketbook. If you’re an active real estate investor you’re familiar with fix-n-flip and private money loans. These short-term (typically 1-year) loans are more expensive than traditional financing, however, these products have been wildly successful because of the ease and speed in which lenders finance these loans.
Wall Street Takes Notice
Now with the backing of Wall Street, large institutional and online lenders began bundling these loans into mortgage bonds, or better known as (MBS) mortgage-backed securities, freeing up Lenders for more business. Armed with renewed confidence and mortgage-backed securities Lenders have developed new and improved programs targeted to real estate investors.
New Capital Creates a Long-Term Option
Relatively new to the market is a new non-traditional long-term ‘stated-income’ program. Longer-term options are 5/1 & 7/1 ARM: 5 and 7-year fixed periods followed by an adjustable rate period and amortized over 30 years. Interest Only options are available.
Why Long-Term Financing
These new programs are ideal for real estate investors seeking improved cash-flow. With an expected lower monthly payment your cash flow increases while you build up equity on your property, a win-win situation.
Long-term financing can be a shrewd monetary tool. Many savvy real investors will use their equity buildup to access capital and buy additional real estate investment properties or rehab existing investment properties.
An added benefit of long-term financing is the ability to buy with less down payment for greater financial leverage.
Lower Rates, Lower Costs, and a Fast Close
Tom Brooks, an active real estate investor, who both buys and holds and fix-n-flips in Florida. Tom found the long-term loan option a perfect fit for his property just remodeled and recently rented. With an $800k appraised value he was able to get a loan of $640k (80%) as cash-out to buy a new property in contract. Pleased that his new Interest Only, taxes and insurance mortgage payment was offset by his rental payment, allowing him to stay positive on this property. He was able to close this cash-out refinance within 10 days with enough time to meet his deadline on the purchase contract
of his new property.
Changes from Hard Money to Private Money
Private money lending has transformed from the local hard money shop into the institutional lender. Backed by Wall Street these lenders flushed with new capital are fueling the market producing lower rates and fees for both short and long-term financing.
The fix-n-flip real estate investor will always need quick and easy access to capital for acquisition of more investment property. New options in short-term financing are lower rates, higher loan-to-values, and lower costs. However, products offered by institutional private money lenders will require experience with a recent proven track record of buying and selling real estate.
Navigating the Changing Landscape of Real Estate Investor Financing
The reality is, the real estate funding marketplace is constantly evolving. All these recent events increase competition and drive down interest rates and costs benefiting the real estate investor.
Mortgage Brokers with a specialty in investment property financing can be invaluable consultants for real estate investors. Just like your CPA, you want to build a relationship with your mortgage consultant developing long-term financial strategies. Think you might be ready to get started? Learn more about our private money loans here.
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About HomeLife Mortgage
For more than 25 years, HomeLife Mortgage has built a strong reputation in California and Florida as a leading mortgage broker, servicing the needs of borrowers who have been unable to obtain conventional financing. HomeLife Mortgage is at the forefront of non-bank lending offering the next generation of mortgages including Jumbo Non-Prime Loans, Real Estate Investor Loans, Bank Statement Loans, FHA Loans and VA Loans.