Buying
a Pearl River Home … With a $0 Down Payment?
Marcellariggs.com
Some of
Pearl River’s wealthiest buyers may be getting a mortgage without putting a single
dollar down. And we aren’t talking about single-bedroom fixer-uppers, either!
It's called 100% financing, and, at first
blush, it looks suspiciously like a version of the strategy that sent the
economy reeling in 2008. But lenders
feel that well-heeled Pearl River residents who are getting a mortgage through
these programs are totally different. How
so? you may ask.
For openers, these loans are offered only
to the super-qualified: those with serious investment portfolios they can use
as collateral. That means getting a mortgage with zero cash for the down
payment. That can carry an additional tax benefit, since the borrower won't
have to pay a capital gains tax on investments liquidated to fund a down
payment.
Since current mortgage rates can be as low as
2.5%, since even middling investment accounts often return a higher rate, the
difference make this strategy what the Wall Street calls an ‘arbitrage play’.
So what would a homebuyer getting a mortgage
in Pearl River need to do to qualify for one of these mind-bending
loans? In addition to the willingness to
put up two forms of collateral (the property and a portion of your investment
portfolio), the Wall Street Journal offers some relevant details:
• The amount that can be borrowed
against any investment account depends on what’s in the portfolio. Usually up
to 95% of account cash; up to about 80% for bonds; between 50% and 75% for most
stocks. Withdrawing pledged funds is usually restricted.
• To get the lowest rates, clients who already have
significant assets at a particular bank should consider applying for 100%
financing there.
• Borrowers still need to pass regular underwriting
requirements. They’ll need -- high
credit scores, a low level of overall debt, and documentation of substantial
income or assets.
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