Amortization – How to choose between 10 or 30 year options?

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When you acquire a mortgage, the lender divides the repayment schedule into several monthly installments over a fixed period. Amortization is the process of spreading out the mortgage over multiple years and into a series of fixed payments. The total mortgage amount, including the principal balance and interest, is supposed to be paid off with the last installment.

As a borrower of an amortized mortgage, you need to repay a specified monthly amount that pays off a portion of both the principal and interest. After every installment, the total loan balance decreases and finally gets paid off with the last payment.

For example, if you obtain a $20,000 amortized mortgage for five years, the lender will divide it into 60 monthly installments, including the principal and the interest amounts. Presume you need to pay approximately $377 per month and respectively $294 and $83 go into squaring off the principal and interest. Then, it will be $295 and $82 respectively in the next month. Over the loan term, the amount of principal payment will increase, and the interest will decrease (although the monthly installment will be the same).

At America Mortgages, you can enjoy an amortization period longer than the mortgage term in the case of commercial loans. For instance, if you take a loan for ten years, the amortization period could be 30 years meaning the monthly installment amount will be similar to a 30-year loan.

If you are to repay this amount over 120 months at $1,000 per installment, the rate will continue for 119 months. In the last month, you will pay the remaining balance ($81,000 in this case) by one balloon payment.

Amortization is available on fixed-rate mortgages and home equity, personal, and auto loans. You won’t get this facility on credit cards and interest-only loans.

Advantages Of Investment Mortgage Loans Over Cash Purchases

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As a U.S. real estate investor, investment mortgage loans can be very beneficial to you. America Mortgages focuses specifically on these types of mortgage loans. There are several programs on hand that make it possible for people to get a mortgage to invest in real estate.

Some of them are better than others, but they can all help you out in some way. If you are considering getting a mortgage, here are a few advantages that you can get from an investment mortgage loan.

Advantages

Use other people’s money – The biggest advantage of using investment mortgage loans is that you get to use other people’s money. Many financial experts have said that you should use other people’s money whenever you can. When you get a mortgage, you only have to put up a certain percentage of the property’s money, but you still get to benefit from owning the whole property. You get to take advantage of the property’s appreciation, and you get to use it for whatever you want. This allows you to hang on to your capital and use it for other investments.

Reasonable interest: With most mortgages, you will be able to get a very affordable interest rate as long with or without a U.S. credit score (FICO). When you get a low-interest rate like you can with an investment mortgage, it can save you a substantial amount of money. For the cost of the loan, it is usually well worth it to get a mortgage instead of using your funds. Hang on to your cash and use it towards additional investments.

Easy approval: With an investment mortgage, you will usually be able to tell whether you are approved relatively quickly. America Mortgages has pretty cut and dry standards when it comes to getting you approved for an investment mortgage. America Mortgages has loan programs for U.S. Expats with or without U.S. credit. We understand that living abroad often changes factors and your ability to borrow in the U.S. Our loan programs are tailored towards your exact situation.

Not a U.S. citizen, Foreign National, or considering relocating abroad for work or school? We can help. Our Foreign National / Non-U.S. citizen mortgage loans were created for these situations. Qualify with No U.S. credit. No U.S. residency. No income verification. It’s not simple, but we have it down to a science with our expertise in this market. You will know where you stand and if you will qualify within a reasonable amount of time.

Increase your reach: With the use of investment mortgages, you can increase your investment power. As you grow, you can keep buying more and more property. In Asia, where property prices have increased, and square footage and yield have decreased, finding an affordable investment outside your home country makes sense. Many people would not be able to purchase property otherwise as it usually takes a significant investment. You can keep picking up more and more stuff as you go.

Build your net worth: Hong Kong, Singapore, Shanghai, and other large Asian cities have cooling measures to stabilize a fast appreciating Real Estate market mainly due to outside investment and the lack of affordable Real Estate options. Being able to build your net worth on a global scale gives with a reasonable mortgage loan that eventually you will have all of the property paid off gives you the same opportunity as anyone else regardless of your passport. You are free to do what you want with all of the property. If you had to rely on your funds for all of this, much of it would not be possible.

The Verdict

Using an investment mortgage can be a great way to get involved in the real estate investment market. Many people have gained considerable amounts of wealth through the use of real estate investment. Therefore, if you are considering getting involved in the field, you should definitely take advantage of investment mortgages. The advantages that you will receive as a result of using them will help you in a number of ways. If you can qualify for one, it makes a lot of sense financially. America Mortgages’ primary focus is helping non-U.S. citizens and Expats obtain prime, quality investment mortgage loans not only in the United States but on a global scale.

What Are You Waiting For?

For more information on U.S. or mortgage loans in other countries, please enquire via email – Send Email.

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American hotel executive in Toronto purchases home in Austin for rental income.

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The Client

This client was the General Manager of the top luxury hotels in Toronto. Like any hotelier, he’s been away from home since his university days.

How We Helped

Our client had a decent FICO score for someone that’s been away from home for 30 years. That’s because he has used his only credit card regularly for the past 20 years. However, his breadth of credit was not sufficient to carry a mortgage.

We put our client on a 3-month Credit Enhancement Program where our team walks you through a specific process to build, maintain and strengthen your credit profile.

Our client has a FICO score of over 800 and qualified for the cheapest ‘Prime” loan available.

Loan Details

NationalityProperty ValueLoan AmountLTVRate
U.S. Citizen $335,000 $268,000 80% 3.35%
Term StateProperty TypePurposeLoan Type
30 year fixed Austin, TexasSingle-Family Residence (SFR)PurchaseResidential
NationalityU.S. Citizen
Property Value$335,000
Loan Amount$268,000
LTV80%
Rate3.35%
Term30-year fixed
StateAustin, Texas
Property TypeSingle Family Residence (SFR)
PurposePurchase
Loan TypeResidential

Scottish doctor buys three-unit triplex in Baltimore to rent to students at John Hopkins.

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The Client

Our client was a former doctor at John Hopkins but moved back to Edinburgh, Scotland. He saw firsthand the number of international students applying to the university and the lack of housing.

How We Helped

Our client identified a cash-flow positive property that was currently rented to students. As he used to live and work in the U.S., he assumed he could call the local bank he used while living in the U.S. Even though he still maintained a checking and savings account with the local bank in Baltimore, they were unable to offer him a mortgage for the purchase. He came across our company online, was pre-approved in one week, and closed the transaction within a month.

Loan Details

NationalityProperty ValueLoan AmountLTVRate
U.K. Citizen $810,000 $567,000 70% 6.125%
Term Address Property TypePurposeLoan TypeHome use
5/1 ARM Baltimore, MarylandThree-unit triplex Purchase Residential Rental apartments for International Students
Nationality U.K. Citizen
Property Value$810,000
Loan Amount$567,000
LTV70%
Rate 6.125%
Term5/1 ARM
Address Baltimore, Maryland
Property TypeThree-unit triplex
Purpose Purchase
Loan TypeResidential
Home useRental apartments for International Students

What is an Appraisal – and how is it used in a mortgage?

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An appraisal is simply an ‘official’ assessment of a property value. It is an integral part of a home-buying process since the mortgage lender expects the correct valuation of the property you will be purchasing.

When you apply for a loan for buying a house, the mortgage lender will require a report from the appraiser about the market price or a possible selling price of that house. These will be ordered by America Mortgages at the Processing Stage of your loan – on your behalf and will be the only time we will ask for any form of payment.

It’s a rough estimate that the lender uses to determine the mortgage rate. The principal or loan amount will be lower than the appraised value of the property. America Mortgages loans out 75% (for Foreign Nationals) to 90% (for U.S. citizens) of a home’s appraisal value.

The appraisal must be done by a person or an organization with the required licenses in that jurisdiction.

A licensed professional appraiser will work without any bias and make sure that the estimation is fair. When the lender requests the appraisal during the mortgage approval process, it will be randomly selected from a panel of reputable companies to ensure an unbiased opinion.

So, what features of the house matter to the appraiser? Some people have the misconception that eye-catching decoration and luxurious furniture increases the price. In fact, these things add value during other steps of home buying and selling, not in the appraisal process.

A home’s value will depend on its current condition, square footage, number of bedrooms, location, neighborhood, and a handful of other things. Appraisers will also note the views, which means overlooking a beach, lake, or the city. A property in a prime location or a prestigious neighborhood will qualify for a higher loan than those located in a less desirable area.

Normal appraisals range between $500-800 depending on State and location. If a lender requires a Rental Comparison, it may add $100-200 more.

British banker in London closes a $1.6M mortgage for a LA home at 3.35%!

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The Client

Our client, Digby R, is a senior investment banker living in London. He is planning to make a switch from banking to be a CFO of technology and wanted to buy a place in Los Angeles to rent it out in advance.

How We Helped

Unable to find any bank that could help him given his ‘overseas’ income and the late nights trying to research almost made him give up. Then he reached out to America Mortgages on a referral by a former customer.

We managed to get him an incredible rate for a Foreign National at an incredible 3.35% for a shorter-term fixed period, which was perfect for his timing. Digby is now an owner of an incredible property in Pasadena and he is ever so grateful!

Loan Details

NationalityProperty ValueLoan AmountLTVRateTerm
U.K. Citizen$2,600,000$1,600,00060%2.85%3-year fixed,
30-year amortised
City, StateProperty TypePurposeLoan TypeHome use
Pasadena,
California
Single-Family HomePurchaseResidentialInvestment
NationalityU.K. Citizen
Property Value$2,600,000
Loan Amount$1,600,000
LTV60%
Rate2.85%
Term3-year fixed, 30-year amortised
City, StatePasadena,California
Property TypeSingle-Family Home
PurposePurchase
Loan TypeResidential
Home useInvestment

U.S. entrepreneur living in Sydney refinances his home in Portland, Oregon.

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The Client

Our expat client traveled to Sydney after university and met his current wife and has been there ever since. He’s now a founder of a successful technology company in Australia.

How We Helped

Our client’s peculiar situation is that his net worth is high but does not earn that much in salary, as with most founders.

He came to our site, and it immediately resonated with him since our clients ARE ONLY U.S. Citizens and Foreign Nationals living overseas. Our U.S. Expat specialists knew the exact lender and program to match our client’s requirements.

Loan Details

NationalityProperty ValueLoan AmountLTVRate
U.S. Citizen $2,350,000 $800,000 34% 2.75%
Term StateProperty TypePurposeLoan Type
30 year fixed Portland, OregonSingle-Family HomeRefinanceResidential
NationalityU.S. Citizen
Property Value$2,350,000
Loan Amount$800,000
LTV34%
Rate2.75%
Term30-year fixed
StatePortland, Oregon
Property TypeSingle-Family Home
PurposeRefinance
Loan TypeResidential

Bubble In The U.S. Housing Market? We Don’t Think So, And Here’s Why.

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Is there a bubble?

Through the first half of 2018, existing-home sales are down slightly by 2.2%, while new home sales are ticking up 7.4%. Home prices continue to increase by 5%. Distressed property sales have fallen to historic lows, making up only 3% of total sales in recent months. The one area of concern is increasing housing unaffordability, which has still been inching higher. After reaching a cyclical low of a 63% ownership rate in late 2015, the rate increased to 64.4% in the second quarter of 2018 as three million additional households became homeowners this time, bringing the total to 77.9 million. The total number of renter households has remained roughly the same at 43 million for the past three years.

Comparing the current U.S. housing market with its performance in 2007-2008, where sub-prime mortgages dominated, today’s market is more disciplined, driven by common sense underwriting of mortgages, strong U.S. economic indicators, and jobs growth.

Yet even with the increase in mortgage rates and higher home prices, the homeownership rate has still been inching higher. After reaching a cyclical low of a 63% ownership rate in late 2015, the rate increased to 64.4% in the second quarter of 2018 as three million additional households became homeowners this time, bringing the total to 77.9 million. The total number of renter households has remained roughly the same at 43 million for the past three years.

Comparing the current U.S. housing market with its performance in 2007-2008, where sub-prime mortgages dominated, today’s market is more disciplined, driven by common sense underwriting of mortgages, strong U.S. economic indicators, and jobs growth.

Is the US housing market headed for another bubble?

The short answer – No. Although no one can predict the future, the U.S. housing market is far from becoming a bubble. The U.S. housing market is on solid ground, well supported by consistent growth, strong demand, and a business-friendly regulatory environment. The robust U.S. economy and relatively low-interest rates (5% range is still low) create strong drivers for homeownership.

Developers in many regions of the U.S. unable to keep up with demand. In stark contrast to the 2008 bubble, we saw an overheated market with an over-supply of new homes combined with widespread subprime mortgage financing. In this sector or the U.S. housing market, today’s growth has been entirely different with clear developer caution and discipline to not get ahead of themselves with a speculative inventory.

What will drive tomorrow’s housing market?

The fundamental drivers of the appetite for homeownership and investment are job creation, population growth, housing permit issuances, and housing affordability. These four highly-correlated factors create a win-win scenario for development alone.

The lack of supply and the accompanying home prices quickly rising are the sources of market headaches. However, the supply shortage is a much better problem to have, compared to a demand shortage. The current problem also is an indicator of no meaningful price decline nor an impending foreclosure crisis. Rather, there is a good possibility for solid home sales growth once the supply issue is addressed.

Hot VS. super hot

The two hottest housing markets, for example, Denver and Seattle. These markets are said to be slowing down, from being super-hot to now just hot without the extra adjective. The months’ supply is less than 2 months in Denver and Seattle, and sales are falling. It is not because the buyers are going away, but because there is not enough inventory, and people are consequently being increasingly priced out.

Home prices in both markets have grown at around 10% for each of the past five years. That is an exceptionally fast price gain. The national job growth rate is 1.6%, and the labor market is very solid in both cities, with a 2.8% job growth rate in Denver and 3.0% in Seattle. The problem is, not enough homes were built or listed for sale to meet the demand. However, if more homes are built and people choose to put their properties on the market to take advantage of this growth, more inventory is introduced, then home prices will not go out of bounds.

These two cities and the U.S. housing market, in general, are benefiting from the country’s exceptional economic performance, due in part to 2018 tax reforms. Many U.S. corporations support the current federal government’s pro-business, predictable regulatory environment, and job-creation mandate. All are propping up the U.S. housing market for the foreseeable future.

Bubble?

The word “bubble” is on many home buyers and investors’ minds, and it is worth laying out why today’s conditions are fundamentally different compared to a decade ago. Back then, lending standards were so loose that they were almost non-existent. By contrast, today’s lending standards are still stringent, or asset-based as evidenced by a mortgage default, and foreclosure rates are at historic lows. On the supply side, there was overbuilding with 2.1 million housing starts during the bubble years. Today, we are just scratching 1.3 million.

The U.S. housing market is benefiting from the country’s exceptional economic performance, due in part to President Donald Trump’s 2018 tax reforms. Many U.S. corporations are supportive of the current federal government’s pro-business, predictable regulatory environment, and job-creation mandate.

Although no one can know the future, the U.S. housing market is far from becoming a bubble. It is easily characterized as the opposite – sustainable, measurable growth based on sound fundamentals. The good news is – all data suggests that the probability of a nationwide home price collapse is not foreseeable future.

Investing and obtaining a mortgage as a NON-U.S. citizen

Now that we explained why we don’t believe there is an impending bubble, now may be the perfect time to invest, and obtaining a U.S. mortgage loan is easier than you may think.
Purchasing a house in the U.S. as a foreign citizen is simple if you plan to pay in cash (or having all the money saved to buy the home in one lump sum). If you’re not in the financial position to purchase a home with cash or find leverage is a better option for you, you’ll need to obtain a mortgage loan to purchase the property. This is where the process becomes tricky. Fortunately, America Mortgages’ primary focus is on the U.S. market, and its only focus is these types of mortgages.

Most U.S.-based mortgage lenders look at a borrower’s U.S. credit history to determine their eligibility for a mortgage loan. As a non-U.S. citizen, you don’t have a U.S. credit report, making it difficult for lenders to analyze the risk of loaning you money to purchase a home. That means your lender will elevate your risk factor as a borrower. This doesn’t have to be the case. Nor do you have to stay up late at night in Asia, calling lenders, brokers, and banks to find someone who will understand your situation.
It may take you longer to find a lender who is willing to work with you, and it may take longer to get approval for your mortgage loan. You might also pay a higher interest rate. We understand the complexity of analyzing risk, calculating foreign income, and alternative sources of acceptable credit verification. We do it all day, every day. It’s not difficult if you know the terrain, and in most cases, we can find a U.S. mortgage loan for every client.

Credit: data points and statistics provided by Forbes, NAR, U.S. housing stats, Aug-Oct 2018.

For more information on mortgage loans in the U.S., please submit your details on our contact page or email America Mortgages at hello@americamortgages.com.

The Basics of a “1031 Exchange”.

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A 1031 exchange is simply an exchange of one investment property for another, where the capital gains taxes on the property sold are deferred. The strategy is named after the section in the IRS tax code, section 1031. A 1031 Exchange is a very popular and commonly used strategy in buying and selling investment properties. Investors can defer the capital gains taxes to a future period where it may be more advantageous to pay them.

An investor considering using a 1031 Exchange should engage a 1031 Exchange agent and their CPA early in the process. There are very specific timelines and requirements that need to be met for the exchange to be successful. A miss on a timeline or property detail could void the exchange or result in a sponsor’s tax event.

This article will touch briefly on two of the main requirements for a successful 1031 exchange: timeline and debt replacement.

There are two main periods in a 1031 Exchange. The first is the 45 day period where you must identify three potential properties to exchange for and notify your exchange intermediary of those properties. The intermediary will receive the cash from your property’s sale and hold onto that cash throughout the exchange process. If the cash from the sale goes to the sponsor, the exchange is void.

The second timeline is within 180 days after the sale of your property, and you must close on purchasing one of the properties you had previously identified to your intermediary. It’s important to note that both time periods run concurrently. If the sponsor takes the full 45 days to identify replacement properties, they will have fewer days to close on the property they ultimately choose.

Debt replacement is often an area where investors find themselves in a taxable event. If there is any mortgage debt on the property being sold, that debt needs to be “replaced” on the new property. If the debt is lower on the new property, the difference will be counted as cash to you and could be taxable. For example: if you sell a property with a $1M mortgage balance on it and only have a loan of $700k on your new property, the difference of $300k is considered cash to you and could be taxable.

This article intended to quickly highlight a few key parts of a 1031 Exchange. Any investors looking at utilizing this strategy should engage a qualified exchange agent and their CPA for further advice on the process.