Acquiring real estate "Subject To" is an investment strategy that allows investors to acquire a property with little or no money out of pocket by leaving the seller's existing mortgage in place.
More simply, the investor does not have to get a loan through a bank or hard money lender to buy the property because they have purchased the property "subject to" the existing loan or loans. Put another way, "subject to" is a way to control a property by having the seller of that property continue to hold their bank financing in their name, but give the interest, benefits, and responsibility of the property to the investor. Because the seller's name remains on the loan they will still remain liable for the payments if they were not made by the buyer.
Many times investors ask me to send them information on a hard money loan. As a mortgage broker with many programs and options it is hard to tell them exactly what the qualifications are for financing their project. They are many because hard money lenders are private investors.
Each private investor makes up their own guidelines. Unlike conventional financing there is no secondary market and there are no quasi government organizations like Fannie Mae or Freddie Mac that establish uniform or conventional guidelines.
There are qualifications that each bridge and real estate rehab lender have in common.
Typically the value of a hard money loan is about 65% 70% of the value of the property. This is known as the LTV (Loan To Value).
The average LTV used to be higher than it is now, however due to rampant lender overestimation of property values in the '80s and '90s, interest rates were raised, and LTVs lowered.
Now, hard money lenders typically want to be in the "first lien" position (meaning their lien takes priority over all others) on a given property, so if the value of the property isn't enough to cover the existing mortgage, the loan will need to be cross collateralized with another property.
These cases are often referred to as "blanket mortgages."
More simply, the investor does not have to get a loan through a bank or hard money lender to buy the property because they have purchased the property "subject to" the existing loan or loans. Put another way, "subject to" is a way to control a property by having the seller of that property continue to hold their bank financing in their name, but give the interest, benefits, and responsibility of the property to the investor. Because the seller's name remains on the loan they will still remain liable for the payments if they were not made by the buyer.
Many times investors ask me to send them information on a hard money loan. As a mortgage broker with many programs and options it is hard to tell them exactly what the qualifications are for financing their project. They are many because hard money lenders are private investors.
Each private investor makes up their own guidelines. Unlike conventional financing there is no secondary market and there are no quasi government organizations like Fannie Mae or Freddie Mac that establish uniform or conventional guidelines.
There are qualifications that each bridge and real estate rehab lender have in common.
Typically the value of a hard money loan is about 65% 70% of the value of the property. This is known as the LTV (Loan To Value).
The average LTV used to be higher than it is now, however due to rampant lender overestimation of property values in the '80s and '90s, interest rates were raised, and LTVs lowered.
Now, hard money lenders typically want to be in the "first lien" position (meaning their lien takes priority over all others) on a given property, so if the value of the property isn't enough to cover the existing mortgage, the loan will need to be cross collateralized with another property.
These cases are often referred to as "blanket mortgages."
from Real Estate Investing Tips - LM2 Investment Group - Blog http://ift.tt/1CgdBdd
No comments:
Post a Comment