Amazing New Loan Product

Amazing New Loan Product by Bill Roberts

At our Windsor Capital monthly breakfast today we had a presentation by Paul Financial on their new "Equity Advantage" loan product.

Right now it is a conforming 30 year fixed with a pay-option component. It is only for well-qualified borrowers 75% LTV or less, O/O, N/O/O, full doc, NID/NIV (no ratio), purchase or cash-out re-fi.

The pay-option component works by including a $0 Heloc that grows by the amount of the payment deferred. The underlying first is fully paid and the deficiency added to the Heloc. This way the borrower gets a 1098 at the end of the year for the full interest on the mortgage even if they only paid a portion of the interest.

The monthly payment can be as much as 6% below the note rate (i.e. a 7.5% note rate could have a 1.5% pay rate) and does not recast. After approximately 60-65 months the loan payment will step up to fully amortized. Remember the underlying first trust deed and note is a fixed rate loan. The corresponding Heloc is at prime. It is when the Balance of the first + Heloc reach 85% LTV (initial appraisal) that the payment is increased to fully amortized.

This is a "perfect" product for an investor that doesn't want negative cash flow.

All we need now are higher conforming loan limits.

 

 
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6 Comments on Amazing New Loan Product

Interesting product Bill.  This almost sounds like the MMA's that are being touted all over the place right now.  What are the FICO score requirements and can you send me info on the investor? 

10/03/2007 10:51 PM by Kate Bourland; Redding Mortgage Home Equity Specialist (North State Home Loan & Mortgage)

Nice explanation on this. Are your investor clients finding any thing to buy in San Diego? I recently sent one of my investor clients to an agent Austin. I have not heard what is being purchased but I sent him a couple recommendations and he usually follows through. He uses a financial advisor for final decision making.  He is also looking at a structured sale on a Kansas Investment. He is a TV commercial producer.

 

10/04/2007 12:32 AM by The Real Estate Text Book authored by William Johnson GRI CRS e-PRO (RE/MAX Associates)

Kate, it is actually the reverse of the MMAs. The lender is Paul Financial. My AE is Jon Golland 877-472-8534.

BTW I met Derric Melbourne yesterday. I will probably join SOFA with him. Thank you.

Bill Roberts

10/04/2007 08:54 AM by Bill Roberts - "Baby Boomer" Retirement Planning (Brooks and Dunphy Real Estate)

William, there is a lot to invest in in San Diego right now. As you know if you've read through my blog I specialize in use change. This is an opportunity that is always present.

It is a good idea to keep your investor clients close to home.

Thanks for your comments.

Bill Roberts

10/04/2007 09:01 AM by Bill Roberts - "Baby Boomer" Retirement Planning (Brooks and Dunphy Real Estate)

Bill

 I'm glad that you met with Derric, he's a good guy!!

If I'm reading this correctly, this product just shifts the balance of the home loan from the First to the HELOC And the loan never really gets paid down.  In essence, as the first gets smaller, the HELOC gets bigger.

Are you saying that this is a Tax Strategy?  Why would someone want to do this?  What income brackets is it beneficial for? 

10/04/2007 10:32 AM by Kate Bourland; Redding Mortgage Home Equity Specialist (North State Home Loan & Mortgage)

Kate, It is "like" a neg am in that the payment amount is less than the interest amount. The first gets paid in full each month. That interest is probably tax deductible. If the house is owned by an investor who doesn't want negative cash flow he can structure his payment to be the same as the rent he collects. If the investor is banking on appreciation as the reason to own rental property then this program works for him.

Interest rates are fairly low right now. This program locks in a 30 year fixed. Five years from now rates will probably be higher. If the owner wants to keep the house after the five year period they have two basic options: make the higher fully amortized payment or re-fi the heloc.

Bill Roberts

10/04/2007 12:10 PM by Bill Roberts - "Baby Boomer" Retirement Planning (Brooks and Dunphy Real Estate)

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Real Estate - Other: Bill Roberts - "Baby Boomer" Retirement Planning (Brooks and Dunphy Real Estate)
Bill Roberts - "Baby Boomer" Retirement Planning
Oceanside, CA
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