Posted by SteveS(CPA) on March 22, 2004 at 21:42:47:
You should probably post this over in the financing forum, but I’m not sure those loans are out there in any great number unless you find your own private money.
anyone used an interest only loan for investments - Posted by JR
Posted by JR on March 22, 2004 at 17:39:44:
I’m purchasing a triplex as an owner occupant and I’m contemplating using an interest only loan for this. The reason is that it would allow the property to have a nice cashflow while I was living in one unit. Otherwise, it would probably just break even with the other two units bringing in $1100/month combined. Has anyone done this? Do you think it would be a wise move on my part? Also, does anyone know of a good source of this type of financing? I’m shopping around right now even though I’m already pre-approved. I’d like 100% LTV, which I’m pre-approved for, but fast closings and low closing costs are also important items. My fico is about 660. Thanks for the help.
JR
Re: interest only investments loans - Posted by Rich[FL]
Posted by Rich[FL] on March 23, 2004 at 12:22:24:
JR - I’m doing this right now on a rehab I just completed. I’ll be closing tomorrow in fact! I found a local bank (the kind of bank Ed Garcia of the financing forum recommends) that will give a home equity loan, interest only, of prime+1, 5-yr, renewable, no pre-payment penalty. I also found a local credit union will give a 12-yr amortized home equity loan at around the prime+1 rate.
Issue #1: you must currently own the house before you can get a home equity loan like this (great for subject-to purchases with a lot of equity.) The loans I’ve found are for a maximum of 80% LTV on a current appraisal.
Issue #2: If interest rates go up, you’ll get stuck making higher interest-only payments and you won’t have the benefit of principle paydown. In addition, you may have more problems getting a new loan to replace the interest only one as interest rates rise.
Issue #?? I’m sure there are others but I can’t think of them on the fly here at work.
I wouldn’t recommend getting interest-only for long-term rentals. While cash-flow would be great, you could really get squeezed as rates go up. That’s my greatest concern with these at this time.
Hope this helps,
Rich