Taking the “Pain” out of High Net Worth mortgages for U.S. Real Estate, without AUM requirements.

With inexpensive funding and various tax advantages, everyone should take advantage of the benefits of a mortgage when investing in U.S. real estate regardless of the loan size. However, why do the wealthy often find it increasingly difficult to obtain mortgage financing without AUM?

With a portfolio of assets worth millions of dollars, one may assume that securing credit would be a straightforward task for a high net worth (HNW) individual. Unfortunately, the reality can be quite different especially if you’re a foreign national or U.S. Expat.

The unique nature of a HNW’s wealth – their income, investments, and liquidity – puts this group of people at a surprisingly high risk of being turned away by conventional banks unless they are willing to deposit a significant amount of funds for the bank to manage. This is certainly true in the mortgage market, and what’s more, it is an issue that has become more prevalent post-Covid.

American Mortgages has a dedicated HNW Team that focuses on mortgage solutions for foreign nationals and U.S. expatriate clients.

“As a company, our focus is finding solutions that go beyond what Private Banks can offer was the cornerstone of why this has been so successful. Our goal is to be a viable solutions provider and a trusted partner for the private banks and their clients. None of our loans require AUM, hence there are no funds taken away from their current investments or portfolio.”

– Robert Chadwick, co-founder of Global Mortgage Group and America Mortgages.

America Mortgages HNW mortgage loans have a multitude of options when it comes to qualifying for a large mortgage loans regardless of the passport you hold.

1. Asset Depletion – a surprisingly simple way to establish your income. AM Liquid Portfolio uses a unique view on “asset depletion” to qualify HNW clients using their investment portfolio without an encumbrance or pledge of assets. Essentially, all of your assets are entered into a calculation, and a final number is churned out. The final number is then used as the income to qualify. In most cases, as long as the income is sufficient, no other person’s income documentation is required. This makes an often complicated and tedious process simple, transparent, and painless.

2. Debt Service Coverage – When it comes to HNW borrowers, one of the most overlooked and misunderstood loan programs is debt service coverage. HNW borrowers tend to own multiple properties in various asset classes. If the property is used as a rental, then there may not be any requirement to go through the tedious process of providing and verifying personal income. Again, as HNW borrowers tend to have very complicated tax returns, this is a straightforward way to show the borrower’s debt serviceability.

Debt service coverage ratio– or DSCR – is a metric that measures the borrower’s ability to service or repay the annual debt service compared to the amount of net operating income (NOI) the property generates. DSCR indicates whether a property is generating enough income to pay the mortgage. For real estate investors, lenders use the debt service coverage ratio as a measurement to determine the maximum loan amount.

3. Bridge/Asset Based Lending – With Covid still in play, it’s not uncommon for investors to experience a temporary liquidity event. Rather than selling their property, they are using their real estate to release equity. Asset-based lending is an option for both residential (non-owner-occupied) and commercial properties.

Simply stated, HNW bridge loans are used for residential and commercial investment property when more traditional institutional financing sources may not be available. Due to temporary liquidity, many borrowers have capital needs that traditional sources often can’t meet. For example, a borrower purchases property out of bankruptcy or foreclosure and needs to close quickly “same as cash” before long term financing can be arrange.

4. Simplified Income – HNW borrowers often have personal and business tax returns, which are complicated. The complexity of these returns often turns into an administrative nightmare for the borrower when dealing with a mortgage lender. What makes America Mortgages unique is the fact that 100% of our clients are living and working outside of the U.S. We are dealing with HNW clients from Shanghai to Sydney. Simply put, translations and understanding tax codes, deductions, net income, etc., is painful.

America Mortgages HNW Simplified Income documentation is just that. We do not require years or, in some cases, decades of tax returns, P&L, A&L, bank statements, etc. We take an often complicated process and simplify it; 1. If you’re self-employed, we will request a letter from your accountant stating the last two years’ income and current YTD. 2. If you’re employed, then a letter from your employer on company letterhead stating your last two years’ income and current YTD is sufficient. Yes, it’s that simple and painless.

As 100% of our clients are either Foreign Nationals or U.S. Expats, we understand the intricacies and complexities of this type of lending for our borrowers. It’s as simple as that. Our HNW loan programs are structured to meet our client’s requirements. Providing competitive pricing with the assurance that your loan will close is our only focus, and no one does it better.

hello@americamortgages.com

www.americamortgages.com

Real Estate Investors Rejoice! AMERICA MORTGAGES’ INVESTOR RENTAL… Qualify for a U.S. Mortgage using ONLY the property’s rental income!

“Traditional” banks will require income documents before approving a real estate mortgage. You will need to qualify based on your declared income using tax returns, less your monthly debt servicing. That is fine for a “traditional” investor; however, at America Mortgages, we deal with various real estate investors, and 100% of them live and work outside of the U.S – “traditional” is definitely not our type of clients.

Last week’s launchpad article talked about using your asset portfolio income to qualify for a U.S. mortgage. This week, we introduce our newest mortgage program, The America Mortgages’ Investor Rental Mortgage (AMIRM)!

What is AMIRM?

The America Mortgages’ Investor Rental Mortgage (AMIRM) is a debt service coverage mortgage (DSCR) that uses the borrower’s capacity to service or repay the yearly debt payment to the amount of net operating income (NOI) generated by the property. Lenders use the debt servicing coverage in the underwriting process. By using AMIRM, an investor may qualify for a property purchase or refinance using strictly the rental income. AMIRM does not require the borrower to provide any personal income documents, making the process quick, simple and very straightforward. If the monthly rental income (projected or current) covers the monthly mortgage payment and the incidentals such as tax, insurance, and monthly maintenance fee then the loan “debt services” and should be approved. It’s that simple!

Important takeaways of AMIRM:

  • • The debt payment coverage ratio (DSCR) shows how much net cash flow is available to pay the mortgage, typically it is a 1:1 coverage.
  • • When examining rental property performance, both real estate investors and lenders utilize the DSCR.
  • • Possible to qualify on interest-servicing only.
  • • The DSCR might fluctuate yearly, but the approval will be based on the current/project rental income.

The AMIRM determines whether or not a property generates enough revenue to cover the mortgage payments. When a real estate investor applies for a new loan or refinances an existing mortgage, lenders utilize the debt service coverage ratio as one of several factors to determine the maximum loan amount.

The greater the DSCR ratio, the higher the net operating income available to service the debt.

DSCR Formula

  • • Debt Service Coverage Ratio = Net Operating Income / Debt Service

For instance, if a rental property generates $6,600 in rent monthly and the monthly mortgage payment is $6,600 (principal and interest), the debt service coverage ratio would be:

  • • DSCR = NOI / Debt Service
  • • $79,200 Annual NOI / $79,200 Annual Debt Service = 1:1

A DSCR of 1:1 indicates the property makes sufficient income to service the monthly debt.

While there is no industry standard for a substantial debt service coverage ratio in real estate, many lenders and real estate investors will strive for at least a 1:1 coverage. This indicates that, at the very least, the asset covers the minimal amount to service all debt payments.

While the debt service coverage ratio isn’t the only metric assessed when obtaining an AMIRM loan, it is an essential part of the approval process.

Why should you use AMIRM?

Self-employed borrowers often have complicated tax returns or income statements. Instead of a long-drawn-out dissection of your income, you can now simply qualify off the rental income. Period. We won’t ask for tax returns, pay statements, etc. If the property qualifies, the loan is normally approved. If you currently own U.S. property with positive cash flow but are concerned your personal income won’t allow you to release equity or apply for a lower rate, you can now qualify for a loan with your rental income! What better time than now to refinance your property? If these reasons have yet to convince you, here are a few more:

  • • Applying for a new loan? Qualify for a higher-yielding property using AMIRM.
  • • Investing in Commercial Property? Qualify with AMIRM.
  • • Identify profitable rental properties based on rental income. Qualify with AMIRM.

If you’re interested in learning more about AMIRM, speak to one of our professional America Mortgages’ loan officers or email us at hello@americamortgages.com

www.americamortgages.com

All you need to know about AM’s Liquid Portfolio Mortgages!

Heard of the term “asset rich but cash poor”? 

It’s a common issue among entrepreneurs “working for equity” or high net worth investors who report low income but have sizeable real estate portfolios.

Traditional banks require pay stubs, employment letters, and credit scores (we have fantastic programs for this as well), but many of us are not in the corporate world and require more flexible programs to suit the needs of this new emerging investor demographic.

This week we “launch” our new Asset Depletion program for investors who own a collection of real estate assets and use the income from the portfolio to qualify as opposed to using your employment income.

Genius! 

Asset depletion, or ‘asset dissipation,’ is a way to qualify for a loan using substantial assets instead of income from employment. There is no AUM (Assets Under Management) or encumbrance of your portfolio at all, rather, it is simply used to qualify for a loan.

With an AM’s Liquid Portfolio Mortgage, we calculate your monthly ‘income’ by dividing your total liquid assets by the duration of most mortgage loans, 360 months.

This way, you can prove your ability to service the debt without regular income from employment – great for entrepreneurs!

You do not have to qualify solely based on your assets to use funds from asset depletion. You may use it as an additional ‘income’ source on top of any regular income you currently receive.

That said, borrowers who use an asset depletion program to qualify do not need to show any other sources of income or employment. If their assets are sufficient to service the mortgage – as well as regular living expenses – they can qualify based solely on that calculation.

What makes this program an excellent option for HNW clients is the mortgage borrower is not required to cash in their portfolio or encumber in any manner. The assets are only used to demonstrate an ability to make the mortgage payments.

  • · Checking or savings accounts (bank must have a U.S. presence)
  • · Money market accounts (bank must have a U.S. presence)
  • · Certificates of Deposit (CD) (bank must have a U.S. presence)
  • · Investment accounts such as stocks, bonds, and mutual funds (bank must have a U.S. presence)
  • · Retirement accounts (bank must have a U.S. presence)

Asset depletion mortgage example:

Take for instance, a 59-year-old mortgage borrower has $3,500,000 in liquid assets, and another $300,000 in retirement or investment accounts.

This is how their monthly income will be calculated:

  • · Retirement account – 70% of $300,000 = $210,000
  • · Total assets counted – $3,500,000 + $210,000 = $3,710,000
  • · Monthly income – $3,710,000 / 360= $10,305

In this case, America Mortgages will calculate the borrower’s maximum mortgage payment based on a monthly ‘income’ of $10,305.

Should you use an AM’s Liquid Portfolio Mortgage?

If you are wondering whether you are a good candidate for an asset depletion program, try answering these questions:

  • · Are you retired with little to no fixed income?
  • · Are you self-employed but with little to no “provable” income?
  • · Are your assets held in a bank with a U.S. branch or presence?
  • · Do you have Trust assets with completely unrestricted use?

If you answered YES to any of these questions, an asset depletion loan is an ideal solution for you.

For more information on AM’s Liquid Portfolio Mortgage, get in touch with us via email at hello@americamortgages.com

www.americamortgages.com

AM Bridge Loans – The Swiss Army Knife of Financing Solutions

In this edition of the Launchpad Series – we introduce the most widely-used tool for property investors at the moment, A Bridge Loan – often considered the “Swiss Army Knife” of financing solutions.

What are bridge loans?

A bridge loan is a type of asset-based, short-term loan, typically taken out for a few months to a couple of years pending the arrangement of longer-term financing or an exit, such as the sale. It is used to ‘bridge’ the gap during times when financing is critical but not readily available.

Bridge loans let homebuyers take out a mortgage against their current home to make the down payment on their new home. A bridge loan may also be a suitable choice for you if you want to purchase a new home before your current house has sold. This financing structure may also be beneficial to businesses that need to cover operating costs while waiting for long-term funding.

Introducing AM Bridge!

AM Bridge – A liquidity tool once reserved for the wealthy is now available for everyone!

Real Estate investors are often asset rich but cash poor. On paper, their net worth may be significant, but their wealth can be tied up in real estate or other businesses. Accessing such funds might mean sacrificing a stake in their business or surrendering some influence over its future – neither of which may be appealing.

It is not always the case that a real estate investor has a few hundred thousand dollars just sitting in the bank readily available to fund a property immediately. Even if they do, they may not wish to tie all their cash upon one property. In today’s market, the property that investors want could be in high demand and needs to be acted on quickly; these could be higher-yielding investments that need immediate funding. Having access to large sums of cash quickly and easily is what HNW investors have had at their disposal for decades. America Mortgages has now made this powerful liquidity tool available to everyone.

How is it used?

Here are some popular uses of “Bridging” Loans:

– Filling the contingency sale of an old property before you can purchase the new property. You can take a Bridge Loan and use your old house as collateral for the loan. The proceeds can then be used to pay a down payment for the new house and cover the costs of the loan. In most cases, the lender will offer a bridge loan worth approximately 80% of both houses’ combined value.

– To purchase based on the asset value of the new build so the borrower can meet the final payment before delivery.

– For the initial purchase until entitlement or for refinancing after a cash purchase until entitlement.

– To purchase greenfield land to begin commercial development. Once certain stages of development have been completed, it’s easier to obtain traditional bank financing.

– Cash-out Bridge Loan for short term personal or business use.

The Market

The pandemic has created a boom in the bridge loan market in several ways.

Firstly, it has created an economic environment filled with uncertainties, and as a result, more businesses need capital as soon as possible and can’t afford to wait for a traditional loan. They will thus turn to bridge loans.

Secondly, with the threat of the Delta variant and the increased number of companies delaying return-to-office plans, many are looking for new homes in more spacious areas. However, with how hot the property market is – data from Zillow show that houses are currently on the market for an average of 6 days only. Hence, it is critical for buyers to purchase their house as soon as possible to avoid disappointment. But, they may not have sold their old house yet and do not have enough money for this new house, which is why a bridge loan would be extra helpful.

Thirdly, there has been an accelerated trend of people migrating to Sunbelt cities due to greater job opportunities. This has driven up rents in these cities – the Phoenix area had the biggest rent increase in July, up 17% from a year ago. Due to the profitability of the rental trade, more developers and businesses are looking to acquire multifamily rental units. Short-term commercial bridge loans will provide them with the needed flexibility to take on such assets while they look for permanent financing options. This will help businesses get their assets to perform at maximum potential.

The Problem

When an American Mortgage bridge loan specialist gets a request for short term financing, they ask three things;

1. Where is the asset?

2. What is the value and the outstanding debt?

3. What situation are you trying to solve?

Number 3 is the most crucial and often the hardest to rationalize. Even the wealthiest people have used short-term bridge financing to access liquidity even when “conventional” options are still possible. This is mainly due to the time and effort required to obtain long-term financing. Cash-flow, credit issues, or asset use may prohibit a “conventional” bank loan. When time is a factor in a transaction, it is important to see the opportunity cost in not closing quickly or obtaining a simplified equity release.

Our Solution

Typically, the timeline for traditional bank loan processing from origination to closing is longer than most borrowers prefer for a time-sensitive funding solution or if the project lacks sufficient stable cash flow. The short-term nature of bridge loans generally allows alternative lenders to provide an approval decision and funding with greater speed than a more traditional lender. At America Mortgages, we’ve funded loans in as little as a couple of days since the initial contact.

To allow for such a speedy funding process, the sponsor’s expected property value and experience to execute the business plan are the determining factors in the decision-making process. For this reason, the loans are commonly non-recourse, which is another benefit to the borrower.

Bridge loans are often the preferred funding option for uses such as:

– Highly structured transactions

– Discounted note payoffs

– Lease-up stabilization

– Redevelopment of existing properties

– Repositioning of a tired or underperforming asset

– Property acquisitions with a short closing timeline (or challenges on the property or sponsor)

– Recapitalizations/Debt Restructuring or Partner Buyouts

– Other uses on a case-by-case basis depending on borrowers specific funding needs, where traditional funding sources like banks or insurance companies will have a hard time approving such loan requests.

– Lending to foreign nationals with a “same-as-cash” basis

Short-Term vs Long-Term

Unlike short-term financing, longer-term financing is susceptible to the regulatory hurdles associated with securing long-term fixed-rate mortgages. This is why bridge loans are often provided by unregulated lenders, family offices, or in some cases, HNW investors. In addition to the regulatory scrutiny, banks or insurance companies require, the sponsor’s credit history and financial strength also take a front seat in the credit decision for long-term loans. Keep in mind, America Mortgages will never work with “lend-to-own” investors and lenders. Our goal is to find you a solution that works with your situation with a long-term solution and exit from the bridge loan.

While bridge loans are the preferred option for many specific financing needs, several downsides come with short-term financing that is meant to fund projects. When assets need work, lenders will consider these higher risks and, therefore, charge higher interest rates.

Additionally, bridge lenders generally do not exceed 70%-85% of the property cost basis to limit their financial exposure. However, this leverage is higher than traditional lenders would advance for the same project. This is because bridge lenders rely on the sponsor to fix the issues, which made the property ineligible for long-term financing in the first place. This enables the asset to become stabilized and ready for exit through a sale or by refinancing the property through traditional channels.

There’s no denying a bridge loan can be convenient if you’re prepared for a change but don’t want to risk a contingent offer. A bridge loan can also be an excellent way to finance a new house if you need to relocate for a job. For more information on AM Bridge, please connect with us via email at hello@americamortgages.com

www.americamortgages.com

Australian executive purchases apartment unit in St. Louis, Missouri.

The Client

Our client, an Australian Executive, wanted to invest in an apartment unit that was in an unliveable condition in St. Louis, Missouri, to fix and hold it.

How We Helped

Finding a lender was not easy for our client as he had no U.S. credit. He reached out to us in hopes that we’d be able to assist him. Within 20 days, our team found a lender using his local credit score and ARV and at an amazing rate of 7.85%!

We found the client a very competitive foreign national mortgage, and they were able to take advantage of this Tax Incentive.

Loan Details

NationalityProperty ValueLoan AmountARVRate
Australia Citizen $450,000 $247,500 50% 7.85%
Term Address Property TypePurposeLoan Type
12 Months St. Louis, Missouri Single-Family Home Fix-and-Hold Residential
Nationality Australian Citizen
Property Value$450,000
Loan Amount$247,500
ARV50%
Rate7.85%
Term12 Months
State St. Louis, Missouri
Property TypeSingle-Family Home
Purpose Fix-and-Hold
Loan TypeResidential

Canadian businessman picks Florida for high rental yield

The Client

Our client purchased a 4-bedroom single-family home in Florida, intending to fix and flip it. Being a Foreign National made it difficult for him to find a lender who would finance a fix-and-flip property.

How We Helped

His lack of U.S. credit made it hard for him to find a bank to lend to him. Using AM Fix-’N’-Flip program for Foreign Nationals, we were able to use his local credit, and the client was able to get a loan amount based on the ARV. Within a month, the deal was closed.

Loan Details

NationalityProperty ValueLoan AmountARVRate
Canadian Citizen $750,000 $487,500 65% 7.25%
Term Address Property TypePurposeLoan Type
18 Months Orlando, Florida Single-Family Home Fix-and-Flip Residential
Nationality Canadian Citizen
Property Value$750,000
Loan Amount$487,500
ARV65%
Rate7.25%
Term18 Months
State Orlando, Florida
Property TypeSingle-Family Home
Purpose Fix-and-Flip
Loan TypeResidential

U.S. Data Scientist living in U.K., purchases second home in Honolulu, Hawaii

The Client

Our client wanted invest in a second property. She decided to take advantage of rental yields by fixing up a single-family home and then renting it out.

How We Helped

After researching for days, she finally reached out to America Mortgages. Using AM Fix-’N’-Flip program for U.S. Expats, closed the deal in 15 days with a rate of 6.50%!

Loan Details

NationalityProperty ValueLoan AmountARVRate
U.S. Citizen $480,000 $312,000 65% 6.50%
Term Address Property TypePurposeLoan Type
18 Months Honolulu, Hawaii Single-Family Home Fix-and-Flip Residential
Nationality U.S. Citizen
Property Value$480,000
Loan Amount$312,000
ARV65%
Rate6.50%
Term18 Months
State Honolulu, Hawaii
Property TypeSingle-Family Home
Purpose Fix-and-Flip
Loan TypeResidential

Canadian Professor purchases Fix-and-Flip property in Texas

The Client

Our client was a university professor living in Canada. He found a property in Texas that needed some repairs and wanted to take advantage of the low purchase price with the intention to ‘Flip’ it. The property being situated in a good neighborhood within close proximities to good schools and several amenities, convinced our client that he could successfully flip it.

How We Helped

Being a Foreign National caused several problems for our client as banks could not lend to him. After several rejections, our client was referred to us by a lender. Using AM Fix-‘N’-Flip loan program, our client purchased the property for $200,000, and we were able to secure a short-term loan amount of $195,000 based on the after-repair-value (ARV).

Loan Details

NationalityProperty ValueLoan AmountARVRate
Canadian Citizen $200,000 $195,500 65% 8.25%
Term Address Property TypePurposeLoan Type
18 Months Fort Worth, Texas Single-Family Home Fix-and-Flip Residential
Nationality Canada Citizen
Property Value$200,000
Loan Amount$195,000
ARV65%
Rate8.25%
Term18 Months
State Fort Worth, Texas
Property TypeSingle-Family Home
Purpose Fix-and-Flip
Loan TypeResidential

U.S. Expat buys distressed property in Oregon to fix and sell

The Client

U.S. Surgeon living in Toronto was looking to purchase a Flix-and-Flip property in Oregon as an investment, mainly to earn rental yield.

How We Helped

Fortunately for our clients, situations like this are our specialty. We secured a loan for ARV (after-repair-value) using a short-term bridge loan. Being an expat meant that our client had no W2 and lacked U.S. credit.

Loan Details

NationalityProperty ValueLoan AmountARVRate
U.S Citizen $550,000 $302,500 55% 6.55%
Term Address Property TypePurposeLoan Type
12 Months Corvallis, Oregon Single-Family Home Fix-and-Flip Residential
Nationality U.S. Citizen
Property Value$550,000
Loan Amount$302,500
ARV55%
Rate6.55%
Term12 Months
State Corvallis, Oregon
Property TypeSingle-Family Home
Purpose Fix-and-Flip
Loan TypeResidential