Asset based mortgage

[Scuba]

Quote:

Originally Posted by pb4uski Did that taxable income on your returns include irregular Roth conversions or irregular tax-deferred account withdrawals? Or more just interest and dividends? Include capital gains?

No IRA or Roth withdrawals of any kind. Dividends, interest, capital gains on taxable brokerage account plus some deferred compensation that has been annuitized into a moderate income stream.

[Scuba]

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Originally Posted by Willers I’ll spare everyone the details of our tax situation but I’ll just say that we also have some other non-recurring income that came in this year that puts us in a high bracket for any additional ordinary income.

Then now is the time to do a financing transaction!

[rayvt]

Quote:

Originally Posted by Ian S That's a good question. When we did our mortgage (2019) based on monthly TIRA withdrawals, the lender wanted to see the money show up in our bank account statement.

Did this is 2019 and 2020.

One time the underwriter wanted to see the deposit hit our checking account for 2 months. The other time, the underwriter just wanted to see the "periodic withdrawal order" the the broker had on file. Didn't even want to see the deposit.

You can cancel the withdrawals after the loan closes. Once, as soon as the loan closed, I called the broker and told him I wanted to re-deposit the check back to the IRA. (I showed the lender the check, they didn't need to see me deposit it to my checking account.)
He said instead he could just cancel the check, which he did.

[rayvt]

Quote:

Originally Posted by jazz4cash My conclusion is that a broker or mortgage company that specializes in these products is necessary. Having the blessing of Fannie and Freddie should make it routine but it doesn’t seem to work that way.

Aimloan and Amerisave. Both do these all the time. I have refi'ed several times with each of them. They also generally have among the lowest rates around.

I think this is becoming more and more common as baby-boomers retire.

[indiajust]

secured loans are only offered against the collateral in your account. like schwab. you don't go to a bank and take out a mortgage against assets in schwab. you go to schwab.

[rayvt]

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Originally Posted by Willers Assuming you found a lender that would allow only a one month look at income to qualify I agree that the cost would be minimal. I believe finding such a lender would be more than a bit challenging. If you know of such lenders I’m all ears and would love some references.

Aimloan and Amerisave

I have been recommended Dan Cohen at Amerisave, (404)324-4966.

The key person is not the loan officer but the underwriter that looks at your information. And you cannot speak directly to the underwriter.

At various refi's I have been told:
a) "The underwriter wants to see 2 months of the systematic IRA withdrawal hit your checking account."
b) "The underwriter wants (only) to see the systematic withdrawal instruction letter to your broker."
c) "The underwriter wants to see your current checking account statement showing a deposit from your IRA broker."
d) "Nah, it's fine. The underwriter is satisfied with your IRA balance."

BTW, in the last 5-6 refi's, only once have they wanted to see my 1040. Been retired 15 years.

[RobbieB]

Merrill Lynch - B of A. Have half million line of credit based on investment.

[Scuba]

Quote:

Originally Posted by rayvt Aimloan and Amerisave I have been recommended Dan Cohen at Amerisave, (404)324-4966. The key person is not the loan officer but the underwriter that looks at your information. And you cannot speak directly to the underwriter. At various refi's I have been told: a) "The underwriter wants to see 2 months of the systematic IRA withdrawal hit your checking account." b) "The underwriter wants (only) to see the systematic withdrawal instruction letter to your broker." c) "The underwriter wants to see your current checking account statement showing a deposit from your IRA broker." d) "Nah, it's fine. The underwriter is satisfied with your IRA balance." BTW, in the last 5-6 refi's, only once have they wanted to see my 1040. Been retired 15 years.

Wow! I’ve been asked for our 1040, actually two years of 1040’s, every single time I’ve done a mortgage transaction whether it was a purchase or a refi. And our credit scores have always been excellent, and we’ve had plenty of assets for many years. Wonder why the difference? This has happened on our transactions whether we used various mortgage brokers (our usual approach) or a bank we had accounts with.

[newlyold]

Mortgage companies got burned badly when the housing bubble burst, and our experience has reflected their changed priorities.

Example: With a $600K home fully paid off, and me running my own successfully property management business ($15M gross income + assets), AND with my wife working at $250K/year job, I went to a bank for a mortgage.

I'd found a second home on a lake in northern Minnesota that was for sale by out-of-state owners who couldn't keep up with the property anymore due to their age. I asked the bank for a low-interest loan. The property was $800K, and I was willing to put down $700K in cash. I wasn't willing to put more cash than that into it, just in case of unexpected emergencies.

The bank turned me down, despite my credit rating of 842.

I was dumbfounded. They weren't interested in loaning money to me at a low rate unless I was ready to put up my home & business assets as collateral.

I thanked them for the information and went to four other lenders in the area; all had the same response.

Banks & lending companies must have REALLY gotten hit hard by that lending crisis / housing bubble burst.

I ponied up the extra money & paid the owner in cash after negotiating a lower price for 100% cash.

[Koolau]

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Originally Posted by newlyold Mortgage companies got burned badly when the housing bubble burst, and our experience has reflected their changed priorities. Example: With a $600K home fully paid off, and me running my own successfully property management business ($15M gross income + assets), AND with my wife working at $250K/year job, I went to a bank for a mortgage. I'd found a second home on a lake in northern Minnesota that was for sale by out-of-state owners who couldn't keep up with the property anymore due to their age. I asked the bank for a low-interest loan. The property was $800K, and I was willing to put down $700K in cash. I wasn't willing to put more cash than that into it, just in case of unexpected emergencies. The bank turned me down, despite my credit rating of 842. I was dumbfounded. They weren't interested in loaning money to me at a low rate unless I was ready to put up my home & business assets as collateral. I thanked them for the information and went to four other lenders in the area; all had the same response. Banks & lending companies must have REALLY gotten hit hard by that lending crisis / housing bubble burst. I ponied up the extra money & paid the owner in cash after negotiating a lower price for 100% cash.

Yes, from "no doc" to "multi-doc" I guess. When we went for our mortgage back in 2010, you'd have thought we had leprosy. We went to the bank we had a long history with and they demanded half down. We could have paid cash, but would have then had to pay taxes at top rate to cash in 401(k). Mentioned earlier, we were able to show "income" but it was all just so bogus.

At one time, there was a saying that banks only leant money to those who didn't need it. I think those days are back but YMMV.

[jazz4cash]

Quote:

Originally Posted by rayvt Aimloan and Amerisave. Both do these all the time. I have refi'ed several times with each of them. They also generally have among the lowest rates around. I think this is becoming more and more common as baby-boomers retire.

Thanks. That’s good to know. I’ve noticed Aim and Amerisave generally having great rates but I was a bit skeptical. Are these actually asset depletion loans or do you have to set up distributions to get approved.

It also just dawned on me if you have assets in a regular brokerage account rather than IRA or 401k the Fannie/Freddie guidelines don’t apply.

[Broland]

I have a second home I took out a mortgage on to invest a few years ago and had no issues (3.25%). I also showed "no income" other than IRA withdrawals which are inconsistent because I only withdraw when I want to buy something (I try to stay almost 100% invested in the market). There was no problem at that time.

My how the times have changed ... With rates lower I tried to refinance and never succeeded (I have more than sufficient assets with pre and post monies to even pay the whole thing off), but because of "no income" it wouldn't fly.

So, I escalated and spoke to various vendors managers and underwriters and received a very consistent answer "show a -consistent- IRA withdrawal and we will consider that as income". I haven't pursued it yet to see if it works, but 3 different vendors said the same thing. Good luck!

[cat4ever]

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Originally Posted by pb4uski I've heard from other posters that some banks will look at regularly scheduled tIRA withdrawals to your bank account as income....

+1 And yes, it makes no sense, but it works. I did it with 401K monthly scheduled withdrawals. As soon as you get the loan, you can stop the withdrawals. And again, yes it makes no sense, so don't try, just do :-)

[rayvt]

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Originally Posted by cat4ever "I've heard from other posters that some banks will look at regularly scheduled tIRA withdrawals to your bank account as income...." +1 And yes, it makes no sense, but it works. I did it with 401K monthly scheduled withdrawals. As soon as you get the loan, you can stop the withdrawals. And again, yes it makes no sense, so don't try, just do :-)

The very first mortgage I got after retiring, I went through this argument. With the loan officer, not the underwriter (who is the real decision maker).
I said, "What's the difference if I make a monthly withdrawal from my regular (taxable) broker account vs. my IRA account at the same broker."

She said, "We view an IRA as a retirement account and the withdrawals from that is income, whereas an withdrawal from a non-IRA account is just you writing a check to yourself."

Me: " It's no different!!! It's the same name on the account, and the same broker."
Her: "It is to us. You could just stop taking the withdrawals from your regular account."
Me:

So....in their minds, a retirement account is "income" and a non-retirement amount is just ... your own money.

She did say that I could stop the IRA monthly withdrawals after the loan closed, because "After all, somebody could also lose their job after the loan closed."

Basically, they want to see something that looks like a paycheck. A standing instruction to your IRA custodian for a monthly distribution looks like that. To them. After all, it's not just you doing whatever you want, moving your money around between your non-IRA accounts. There's a custodian involved. World of difference. To them.

[Brat]

My daughter and her husband recently purchased a vacation home secured by her holdings of a particular stock. She told me that it had a lower interest rate than a mortgage. She is differently situated than almost all of us as her income is more than adequate to obtain a mortgage and her non-IRA investments are substantial. She lives in California (which may make a difference) but if posters want to know I could ask her for the name of the lender.

[Broland]

Quote:

Originally Posted by Brat My daughter and her husband recently purchased a vacation home secured by her holdings of a particular stock. She told me that it had a lower interest rate than a mortgage. She is differently situated than almost all of us as her income is more than adequate to obtain a mortgage and her non-IRA investments are substantial. She lives in California (which may make a difference) but if posters want to know I could ask her for the name of the lender.

I'm interested in the lender. Thanks

[ERD50]

Quote:

Originally Posted by Brat My daughter and her husband recently purchased a vacation home secured by her holdings of a particular stock. She told me that it had a lower interest rate than a mortgage. She is differently situated than almost all of us as her income is more than adequate to obtain a mortgage and her non-IRA investments are substantial. She lives in California (which may make a difference) but if posters want to know I could ask her for the name of the lender.

Quote:

Originally Posted by Broland I'm interested in the lender. Thanks

This sounds like we have done. The "lender" is yourself, you are borrowing money against your own funds. It a Line of credit against the money in your account. So it's a matter of whether your brokerage will do a LOC on your assets there. I had a large enough account at Etrade, and they were able to do the LOC for me, at a lower than mortgage rate (2.8%-something?). You just have to have enough equity relative to the debt. And I do think they will give a lower debt/equity ratio if you are in individual stocks rather than large diversified funds.

I looked, and for Fidelity, all I could find was a margin loan at much higher rates.

The "catch" is, that rate is floating, so I can't expect it to stay that low forever. I plan to apply for a regular 30 year to lock in these historically low rates, but heard that no one wants to touch a mortgage under these conditions until the home has been owned for ~ 6 months. But it (mostly) simplified the home purchase, and that was part of the goal. Now I can deal with mortgage shopping w/o all the rush of the home buying 'experience'.

-ERD50

[Brat]

My daughter just told me she didn't take a loan on the property. I knew that. I think what happened is what ERD50 described.

[Ramen]

When I was pondering a home purchase last year, an agent pointed me to a local/regional bank that routinely does asset-based mortgages with a 70% loan to value. So for example it can lend up to $280K on a $400K house, meaning the buyer would put down $120K plus pay closing costs. I opted not to buy after all but saved the info for future reference.

[GTFan]

Quote:

Originally Posted by ERD50 This sounds like we have done. The "lender" is yourself, you are borrowing money against your own funds. It a Line of credit against the money in your account. So it's a matter of whether your brokerage will do a LOC on your assets there. I had a large enough account at Etrade, and they were able to do the LOC for me, at a lower than mortgage rate (2.8%-something?). You just have to have enough equity relative to the debt. And I do think they will give a lower debt/equity ratio if you are in individual stocks rather than large diversified funds. I looked, and for Fidelity, all I could find was a margin loan at much higher rates. The "catch" is, that rate is floating, so I can't expect it to stay that low forever. I plan to apply for a regular 30 year to lock in these historically low rates, but heard that no one wants to touch a mortgage under these conditions until the home has been owned for ~ 6 months. But it (mostly) simplified the home purchase, and that was part of the goal. Now I can deal with mortgage shopping w/o all the rush of the home buying 'experience'. -ERD50

Schwab has a Pledged Asset Line for SOFR (Secured overnight financing rate) + 2.4% if you have $1 mil with them. Right now that's less than 2.5%, and yeah it's floating so it's a bridge loan unless you want ride it until rates rise enough to get your attention. It's SOFR + 2.9% if you have less than $1 mil, but then you need to keep a closer eye on your loan to value ratio so you don't have a margin call. No fees that I could see, it's just a straight-up loan that they can approve in a few days. The max loan is 70% of your asset value but you'd not want to be anywhere near that in case the market has a correction.

https://www.schwab.com/pledged-asset-line

If we ever pull the trigger, a good strategy might be to pay cash for a new house with a bridge loan like this, then move when you want and sell the old house and pay off the loan. That way you have no contigencies on the new house other than the usual inspection etc. so you're basically a straight cash buyer superior to most loan buyers. Plus you're borrowing cheaper than your money can earn in the market with little closing costs, you could hold the loan until rates rise then pay it off.