 
In a previous article we discussed the benefits of choosing Index based ARM’s (adjustable rate mortgages) as an alternative to the traditional fixed rate mortgage. These program types are very attractive for the “investor” buyer, a purchaser who will not occupy for a great length of time, and or those who plan to accelerate their amortization. Recently a client had inquired concerning the purchase of property which would be intended for himself as a second home as well as an investment during the “off season”. A prestigious address as well as the new construction feature seemed very attractive, a good choice for his investment purposes. The pre-construction purchase price was $2,000,000.00 and the client was looking to finance as much as possible at the best possible rate of interest. A couple of months prior to our meeting we had refinanced his primary residence which currently has a large amount of equity. Based upon this knowledge I suggested financing the full amount via cross –collateralization of his existing property. The only financial obligation for my client would be closing costs. As for the best possible rate of interest; how does 3.42% sound? We chose a 6 month LIBOR ARM. As I write the LIBOR Index is posted at 1.17%, add the margin of 2.25 for the 3.42% rate. The monthly payment obligation would amount to $8,891.82 principle and interest. This program allows for the rate to remain fixed for six months and will adjust every six months with a cap only 1% per adjustment. Other fabulous aspects of this mortgage include an interest only payment option which suits the client during the months when he would be occupying (reduce payment to $6,840.00 per month). In addition there is a convertibility feature, at any time the client can elect to convert his mortgage into a 30 or 15 year fixed-rate loan or an intermediate term ARM. In this scenario the client had chosen to go with a full income and asset check, however if need be you can also have access to this program as a no-income and no asset verification type loan. The 6 month LIBOR is available for one to four family homes, condominiums & New York Co-ops, primary residences, second homes and investment properties. Furthermore, consider this loan type for rate and term or cash-out refinances as well! As an aside; Foreign Nationals coming from overseas can acquire property in the United States with no credit history in the US providing they are contributing at least 35% to the purchase transaction. For comment and questions I can be reached at (516) 935-5600 extension 13 or e-mail at mrf@bwdcap.com. |
