LESSON 5: SOURCES OF FUNDS Flashcards
1
Q
A
2
Q
A
3
Q
A
4
Q
What is a commercial bank?
A
A commercial bank is a financial institution that accepts deposits from the public and provides loans for consumption and investment to make a profit.
5
Q
What are the primary characteristics of a commercial bank?
A
The two primary characteristics of a commercial bank are lending and borrowing.
6
Q
What are the three types of commercial banks?
A
Private banks, public banks, and foreign banks.
7
Q
What is the role of commercial banks in real estate?
A
Commercial banks are the largest lenders involved in financing real estate, particularly with short-term financing like construction loans, bridge loans, and home equity loans.
8
Q
What are the two types of chartered banks in the U.S.?
A
Nationally-chartered banks and state-chartered banks.
9
Q
What is the role of the Federal Deposit Insurance Corporation (FDIC)?
A
The FDIC insures depositors’ accounts up to a maximum of $250,000 for each account.
10
Q
What are Savings and Loans (S&Ls)?
A
S&Ls are financial institutions that focus on providing checking and savings accounts, loans, and residential mortgages to consumers.
11
Q
How do Savings and Loans differ from commercial banks?
A
Savings and Loans are owned by their depositors, focus on residential mortgages, and typically offer better rates on savings products compared to commercial banks.
12
Q
What is the major difference between Savings and Loans and commercial banks in terms of services?
A
Savings and Loans focus more on consumer loans, while commercial banks are more diversified and focus on business and construction loans.
13
Q
What is a Federal Savings and Loan Holding Company?
A
A Federal Savings and Loan Holding Company is a corporation that owns a controlling interest in one or more savings and loan institutions, but does not offer banking services itself.
14
Q
What is underwriting in the context of commercial loans?
A
Underwriting in commercial loans involves reviewing financial information and the property to assess the risk and determine the loan approval process.
15
Q
What are the main categories of information reviewed during loan underwriting?
A
- General background data, 2. Repayment ability, 3. Security/assets in case of default.
16
Q
What is a Coverage Ratio in underwriting?
A
The Coverage Ratio compares the expected profits/cash flow of the business to the ongoing loan payments.
17
Q
What is the significance of the Debt/Equity ratio in underwriting?
A
The Debt/Equity ratio shows how much debt a business has relative to its equity, indicating the financial stability of the business.
18
Q
What are cross-collateralized loans?
A
Cross-collateralized loans are secured by multiple assets or businesses.
19
Q
What are some examples of lenders that participate in commercial property loans?
A
Life insurance companies, pension funds, commercial banks, and savings & loans.
20
Q
What is a one-bank holding company?
A
A one-bank holding company is a corporation that owns at least one-quarter of the voting stock of a commercial bank.
21
Q
How do Pension Funds and Insurance Companies differ in their investment practices?
A
Pension funds and insurance companies typically invest in conservative instruments but have recently shifted to investing in mortgages and mortgage-backed securities due to limited options in bonds.
22
Q
How does borrowing against a 401(k) help with a down payment?
A
Borrowing against a 401(k) allows for low borrowing rates and no impact on debt-to-income ratio, though it involves sacrificing future investment opportunities.
23
Q
How does a Roth IRA work for buying a home?
A
You can withdraw up to $10,000 penalty-free for buying your first home, but you cannot replace the lost opportunity to earn returns on those funds.
24
Q
What are the risks of using a traditional IRA to borrow money for a home purchase?
A
Some traditional IRAs allow up to $10,000 for a home purchase, but it involves timing risks and the loss of investment opportunities.
25
What are some common types of collateral in commercial loan underwriting?
Real estate, stocks, securities, business interests, and personal guarantees.
26
What is the primary consideration in underwriting commercial loans?
The income stream of the property is the most important consideration, followed by the property's operating expenses and net operating income.
27
What are second mortgages, wraparound mortgages, and owner-carried financing?
They are methods used by sellers to help buyers during times of tight money or high interest rates. These financing methods may help close sales when interest rates are high, and sellers may also earn a higher return by carrying back a second mortgage than putting their equity in a bank.
28
What is the role of indirect lenders in the mortgage process?
Indirect lenders provide mortgage origination services, fund the loan, and immediately sell it to the secondary market. They sell both the mortgage and the servicing rights (the right to collect payments and disburse funds) to other companies.
29
What does the servicer of a mortgage do?
The servicer collects monthly payments, handles taxes and insurance payments, and disburses principal and interest to the investor. The servicer may also deal with issues like mortgage insurance, escrow accounts, and work with struggling borrowers to avoid foreclosure.
30
What is a Service Release Premium (SRP)?
A one-time fee paid to the lender that sells the servicing rights to a mortgage. It is typically 1.25% to 1.75% of the loan amount and is paid by the lender who acquires the servicing rights. The borrower does not directly pay the SRP but might indirectly pay it through a higher mortgage rate.
31
How do mortgage servicing rights affect borrowers?
The transfer of servicing rights typically has minimal impact on borrowers. The loan terms and mortgage rate remain the same. The borrower will be notified of the new servicer and must send payments to the new company. There are no additional fees due to the transfer.
32
How does the servicer handle a borrower’s mortgage insurance?
The servicer collects and sends mortgage insurance premiums to the correct party. If the borrower has enough equity, they can work with the servicer to cancel private mortgage insurance.
33
What is a mortgage servicer’s responsibility if a borrower misses payments?
The servicer must contact the borrower in writing by the 45th day of delinquency to inform them of loss mitigation options, such as loan modification or short sale. If the loan becomes more than 120 days delinquent, foreclosure may begin.
34
How does a servicer handle forced-place insurance?
If a borrower fails to provide proof of required insurance, the servicer can place forced-place insurance on the property and add the cost to the mortgage balance after notifying the borrower at least 45 days prior.
35
What role does a servicer have for borrowers with adjustable-rate mortgages (ARMs)?
The servicer is responsible for notifying the borrower about interest rate changes, providing an estimate of the new rate and monthly payment, and doing so 210 to 240 days before the adjustment.
36
What happens when a mortgage is transferred to a new servicer?
The borrower is notified by both the old and new servicer. The loan terms do not change, but the borrower needs to send payments to the new servicer and may need to adjust automatic payment details. There is a 60-day grace period where late fees cannot be charged if a payment is mistakenly sent.
37
What is the role of a mortgage lender compared to a servicer?
A mortgage lender provides the loan to the borrower, while a servicer manages the loan after it is made, including collecting payments and handling taxes and insurance. Lenders and servicers can be the same company or different companies.
38
What is the advantage of using a mortgage company?
Mortgage companies handle all aspects of the mortgage process, from loan application to closing, and they continue to service the loan. They may also offer a range of mortgage products that cater to different borrower needs.
39
What is the disadvantage of using a mortgage company?
Mortgage companies typically only offer their own mortgage programs and may not have access to a wide range of loan options or the best rates. Additionally, servicing can be transferred, and the borrower may no longer deal with the original company.
40
What are Mortgage-Backed Securities (MBS)?
MBS are securities backed by mortgages, sold on Wall Street as investment-grade securities. They are created when mortgages are sold and pooled together, and investors buy these securities as investments.
41
What is the Secure and Fair Enforcement for Mortgage Licensing (S.A.F.E.) Act of 2008?
The S.A.F.E. Act requires mortgage loan originators (MLOs) to be licensed and meet specific education, testing, and background check requirements. It ensures that MLOs are properly qualified and regulated.
42
Who must be licensed under the S.A.F.E. Act?
All mortgage loan originators who work for institutions that are not federally regulated must be licensed by the states. MLOs working for federally regulated institutions or the Farm Credit Administration are registered with the Nationwide Mortgage Licensing System (NMLS).
43
What are the main requirements of the S.A.F.E. Act for state-licensed MLOs?
MLOs must pass a qualified test, complete pre-licensure education, take annual continuing education courses, submit fingerprints for a criminal background check, and provide authorization for an independent credit report through NMLS.
44
What are Signature Loans?
Signature loans are unsecured loans where the borrower pledges no collateral but signs an agreement to receive the loan, typically up to $500.
45
What are Payday Loans?
Payday loans are short-term loans, typically up to $500, requiring repayment within two weeks. The consumer writes a check as security for the loan.
46
What are Consumer Installment Loans?
Consumer installment loans are secured loans that a borrower repays in multiple installments, with loan amounts ranging from $500 to $12,000.
47
What are Retail Credit Accounts?
Retail credit accounts are financing options offered by retailers, allowing customers to make payments over time for goods and services.
48
What does the Texas OCCC supervise?
The Texas OCCC supervises the licensing and regulation of residential mortgage loan originators.
49
What is a Residential Mortgage Loan according to the S.A.F.E. Act?
A residential mortgage loan is a loan primarily for personal, family, or household use that is secured by a mortgage, deed of trust, or other equivalent consensual security interest on a dwelling or residential real estate.
50
What is a Dwelling according to Section 103(v) of the Truth in Lending Act?
A dwelling is defined as a residential structure or mobile home that contains one to four family housing units, including individual units of condominiums or cooperatives.
51
Who does not need a Residential Mortgage Loan Originator License?
Employees of depository institutions, individuals negotiating loans for immediate family, licensed attorneys in specific circumstances, and others as outlined in the regulations do not need this license.
52
What is the Texas Department of Savings and Mortgage Lending's role?
The department charters and regulates savings institutions, and oversees the licensing and regulation of the mortgage industry in Texas.
53
What is the Department's regulatory philosophy?
The department aims to protect financial interests through fairness, ethical conduct, professionalism, responsiveness, and quality.
54
Who is required to have a Texas Residential Mortgage Loan Originator License?
Any individual or employee engaged in residential mortgage loan origination in Texas, including those who represent themselves as a loan officer or mortgage consultant, or issue prequalification or pre-approval letters.
55
Who is exempt from having a Residential Mortgage Loan Originator License?
Employees of depository institutions, individuals offering loans for immediate family, licensed attorneys in specific roles, and others listed under Texas regulations.
56
What is a credit union?
A credit union is a nonprofit financial institution owned by its members, providing banking services such as loans, checking, and savings accounts.
57
What is the difference between credit unions and banks?
Credit unions are nonprofit and member-owned, while banks are for-profit institutions. Credit unions often offer better customer service and lower fees.
58
How do credit unions offer benefits to their members?
Credit unions provide lower interest rates on loans, higher rates on deposits, and personalized customer service compared to banks.
59
What are the eligibility requirements to join a credit union?
Membership requirements vary, but typically include living in a specific region, working for certain employers, or belonging to a certain group.
60
How do credit unions ensure financial stability for members?
Credit unions are insured by the National Credit Union Administration (NCUA), providing up to $250,000 in insurance per depositor, similar to FDIC insurance at banks.
61
What are the financial benefits of credit union membership?
Credit unions often offer lower interest rates on credit cards and loans, higher deposit rates, lower fees, and more personalized customer service.
62
What are the key differences between direct lenders and indirect lenders?
Direct lenders use their own funds (deposits) to offer loans, while indirect lenders obtain funds from the secondary market to provide loans.
63
What is the role of a mortgage loan officer?
A mortgage loan officer works for financial institutions such as banks or mortgage companies, assisting borrowers with completing loan applications and processing mortgage loans.
64
What is the Federal Credit Union Act?
The Federal Credit Union Act, signed into law by President Franklin Delano Roosevelt on June 26, 1934, authorized the formation of federally chartered credit unions across all states to make more credit available and promote thrift through a national system of non-profit, cooperative credit unions.
65
What are the types of loans that credit unions provide?
Credit unions primarily provide consumer loans (for cars, furniture, appliances) to their members, but larger credit unions may also provide long-term mortgage loans.
66
How are credit unions regulated?
Credit unions are regulated by the State Banking Commissioner.
67
What types of loans can credit unions provide?
Credit unions offer second mortgages, home equity loans, lines of credit, and bridge loans. Some may also offer fixed-rate mortgage loans to be sold in the secondary market.
68
How much down payment can credit unions require for mortgage loans?
Credit unions can offer loans with as little as a 5% down payment.
69
Why do credit unions have lower mortgage insurance rates?
Credit unions generally have lower foreclosure rates, which results in lower mortgage insurance rates for their members.
70
What are modern credit unions?
Modern credit unions are non-profit, member-owned financial services institutions that often offer better rates, terms, and fees compared to other financial institutions.
71
What is the purpose of the Federal Credit Union Act?
The Federal Credit Union Act was created to make credit available to more Americans and promote thrift through a national system of non-profit, cooperative credit unions.
72
Who is responsible for formulating credit union legislation in the U.S.?
Credit union legislation in the U.S. was formulated by Edward Filene, Pierre Jay, and Roy Bergengren, building on earlier legislation from Franz Hermann Schulze-Delitzsch in Germany and Alphonse Desjardins in Canada.
73
What services do federal credit unions offer?
Federal credit unions offer basic services such as passbook shares, share drafts, share certificates, and credit cards, along with other services to meet the financial needs of their members.
74
What tax status do federal credit unions have?
Federal credit unions are considered entities of the United States government and are tax-exempt under savings accounts.
75
What do mortgage brokers do?
Mortgage brokers act as intermediaries between borrowers and lenders, helping to find the best loan offers from various banks or mortgage companies, but they do not fund loans themselves.
76
What are the advantages and disadvantages of using a mortgage broker?
Advantages include the ability to shop around for the lowest rates. The disadvantage is that the broker relies on investors for underwriting, closing, and funding, and may not have control if the investor rejects the loan.
77
What is the role of a mortgage banker?
A mortgage banker originates, funds, and sometimes services mortgage loans using their own or borrowed funds. They can approve or reject loans and help borrowers choose the best options.
78
How do mortgage bankers make money?
Mortgage bankers make money through origination fees and other charges for processing and closing loans.
79
What services do mortgage bankers offer?
Mortgage bankers offer loan origination, processing, underwriting, and closing services, and may also service loans or sell them to investors.
80
How do mortgage brokers differ from mortgage bankers?
Mortgage brokers facilitate loan origination but do not underwrite or fund loans, while mortgage bankers use their own funds and handle the entire process from origination to closing.
81
What is the main disadvantage of using a mortgage banker?
Mortgage bankers typically sell the loans they originate immediately after closing, and the borrower may not know the end investor until after the loan closes.
82
What is a real estate investment trust (REIT)?
A REIT is a company that owns, operates, or finances income-producing real estate. They can invest in properties such as office buildings, apartment complexes, and shopping centers, and provide a way for investors to earn returns from real estate.
83
What are the two main types of REITs?
The two main types of REITs are equity REITs, which own and operate real estate, and mortgage REITs (mREITs), which provide financing for real estate by investing in mortgages and mortgage-backed securities.
84
What are public non-listed REITs (PNLRs)?
Public non-listed REITs are registered with the SEC but do not trade on national stock exchanges.
85
What are private REITs?
Private REITs are offerings exempt from SEC registration, and their shares do not trade on national stock exchanges.
86
What types of real estate do REITs invest in?
REITs invest in various types of real estate, including offices, apartments, warehouses, retail centers, medical facilities, and hotels.
87
How can individuals invest in REITs?
Individuals can invest in REITs by purchasing shares of publicly traded REIT stocks, mutual funds, exchange-traded funds (ETFs), or through investments in public non-listed and private REITs.
88
How do REITs help diversify an investment portfolio?
REITs are a good portfolio diversifier because they have a low correlation with other assets, which can help reduce overall portfolio risk and increase returns.
89
What is a Real Estate Limited Partnership (RELP)?
A Real Estate Limited Partnership (RELP) is a group of investors who pool money to invest in property purchasing, development, or leasing. It consists of general partners who assume full liability and limited partners who are only liable up to the amount they contribute.
90
What are the responsibilities of limited partners in a RELP?
Limited partners are hands-off investors and are not responsible for any losses beyond their investment, as long as they don’t manage the partnership.
91
How are RELPs taxed under U.S. tax code?
RELPs are not taxed as an entity. Instead, they pass income through to partners who must report it individually using Form K-1 and their own tax returns (Form 1040 for individuals and Form 1120 for corporations).
92
What is the role of the general partner in a RELP?
The general partner assumes full liability and manages the day-to-day operations of the partnership. This partner is usually a corporation, experienced property manager, or real estate development firm.
93
Who are typical investors in a RELP?
RELPs generally target high-net-worth individuals and institutional investors. Some require accredited investor status for participation.
94
What is the benefit of a RELP to investors?
RELPs offer potential high returns, but with correspondingly high risks. They also provide certain tax benefits by passing income through to the individual partners.
95
What kind of real estate investments do RELPs focus on?
RELPs may focus on residential developments, commercial properties, or niche markets like retirement communities or luxury commercial spaces.
96
What is the typical investment requirement for RELPs?
Some RELPs may require a minimum investment of $5,000 to $50,000.
97
How liquid are investments in a RELP?
Funds invested in a RELP are usually illiquid, meaning investors cannot cash out at any time.
98
How are income and returns distributed in a RELP?
Limited partners receive dividend distributions and pass-through income annually, which contributes to their return. Some partnerships may have a fixed-term lifespan.
99
What is a REIT?
A Real Estate Investment Trust (REIT) is a tax-exempt entity formed under the Real Estate Investment Trust Act of 1960. REITs allow individual investors to invest in commercial real estate without owning the property directly.
100
What are the types of REITs?
There are three types of REITs: Equity Trusts (invest in commercial real estate), Mortgage Trusts (invest in mortgages), and Hybrid Trusts (invest in both).
101
What are the tax benefits of REITs?
REITs are exempt from income taxes if they distribute at least 90% of their earnings to shareholders as dividends.
102
What role do bonds play in real estate financing?
Bonds help finance real estate loans by pooling mortgage loans into bond securities. These bonds are sold to investors, and the return comes from mortgage interest paid by borrowers.
103
How do tax-exempt bonds assist low-income buyers?
Tax-exempt bonds offer lower interest rates, which help provide below-market financing and down payment assistance to low- and moderate-income buyers.
104
What is a bond?
A bond is a fixed interest rate investment where an investor loans money to an entity for a specified period, and in return, the entity repays the principal with interest.
105
What is a Real Estate Mortgage Trust (REMT)?
A Real Estate Mortgage Trust (REMT) is a type of REIT that buys and sells mortgages on real property, making money from interest and fees on mortgage loans.
106
How are commercial real estate loans different from residential loans?
In commercial real estate loans, the property itself is the primary source of repayment. In residential loans, the borrower’s ability to repay is the focus. Commercial loans tend to have higher interest rates, and lenders evaluate the income generated by the property.
107
What is the importance of the Debt Service Coverage Ratio (DSCR) in commercial real estate loans?
The DSCR is the ratio of a business’s annual net operating income to its annual debt service. A typical ratio requirement is 1.25 or higher.
108
What are hard-money lenders and how do they differ from traditional lenders?
Hard-money lenders base their loans primarily on the value of the property rather than the borrower’s creditworthiness. These loans are typically faster to acquire but have higher interest rates.
109
What is the Loan-to-Value (LTV) ratio in commercial real estate?
The LTV ratio in commercial real estate loans is the ratio of the loan amount to the property’s appraised value, typically ranging from 65% to 80%.
110
What is the difference between commercial and residential property financing?
Commercial property financing focuses on the property's ability to generate income to repay the loan, whereas residential financing evaluates the borrower's ability to repay.
111
What are the types of commercial properties?
Common types of commercial properties include office buildings, retail buildings, industrial buildings, multifamily units, and special-purpose properties like hotels and nursing homes.
112
What is the typical term length of a commercial property loan?
Commercial property loans typically range from five years to 20 years, with amortization periods often longer than the loan term.
113
How does a commercial loan with a 7-year term and a 30-year amortization work?
The investor makes monthly payments based on a 30-year amortization period for 7 years, followed by a balloon payment to pay off the remaining balance.
114
How does the length of the loan term and amortization period affect the interest rate?
The longer the loan repayment schedule, the higher the interest rate may be.
115
What is a prepayment penalty in commercial loans?
A prepayment penalty is calculated by multiplying the outstanding loan balance by a specified prepayment penalty.
116
What is an Interest Guarantee in the context of commercial loans?
The lender is entitled to a specified amount of interest even if the loan is paid off early, for example, a 10% interest rate guaranteed for 60 months.
117
What is a Lockout in commercial real estate loans?
A Lockout prevents the borrower from paying off the loan before a specified period, such as five years.
118
What is Defeasance in commercial loans?
Defeasance is when a borrower exchanges new collateral (usually U.S. Treasury securities) for the original loan collateral instead of paying cash.
119
What are typical prepayment restrictions in commercial real estate loans?
Prepayment restrictions vary, including penalties and clauses like Lockout and Defeasance, with penalties often applied up until the loan’s maturity.
120
What is the typical loan-to-value ratio for commercial property loans?
The loan-to-value ratio for commercial property loans is typically 75%.
121
What are private "Hard Money" lenders used for in commercial real estate?
They are used for hard-to-finance transactions, often offering bridge loans or construction loans with higher interest rates.
122
What is the role of private bankers in commercial real estate lending?
Private bankers have access to different sources of funds outside traditional lending lines, such as local community banks or credit unions.
123
How do real estate syndicates work?
A syndicate pools money from investors to raise capital for purchasing or building a property, with investors contributing funds for specific opportunities.
124
What is the difference between a Real Estate Investment Trust (REIT) and a Real Estate Syndication?
A REIT is publicly traded and provides steady income but little capital appreciation, whereas a syndication invests in a specific real estate asset and is less liquid.
125
How do sponsors and limited partners make money in a real estate syndication?
They earn through property appreciation and rental income, distributed periodically, with profits typically coming after the property is sold.
126
What is a "preferred return" in a real estate syndication?
The preferred return ensures investors are paid a set return (usually 5%-10%) before any profits are shared with the sponsor.
127
What are the advantages of syndication for investors?
Syndication allows for diversification, access to larger deals, passive investment, and tax benefits like 1031 exchange and depreciation.
128
What are some disadvantages of real estate syndication?
Syndication can lack liquidity, control over the property, and the ability to build long-term equity in the asset.
129
What is a 1031 exchange in real estate investing?
A 1031 exchange allows investors to defer capital gains taxes by exchanging one like-kind property for another held for business or investment purposes.
130
What types of properties qualify for a 1031 exchange?
Properties like land, buildings, commercial spaces, industrial buildings, apartments, and even leases of 30 years or more qualify.
131
Who can qualify for a Section 1031 exchange?
Individuals, corporations, partnerships, LLCs, and other taxpaying entities can qualify for a Section 1031 exchange.
132
What is the difference between a simultaneous swap and a deferred exchange?
A simultaneous swap involves exchanging properties at the same time, while a deferred exchange allows for disposing of one property and acquiring another.
133
What is required for a Section 1031 deferred exchange to qualify?
The exchange of properties must be a mutually dependent transaction, with exchange facilitators often involved.
134
What is a reverse exchange in real estate?
A reverse exchange involves acquiring replacement property through an exchange accommodation titleholder, with the property parked for no more than 180 days while the taxpayer disposes of the relinquished property.
135
What is the 45-day limit in a 1031 exchange?
You have 45 days from the sale of the relinquished property to identify potential replacement properties. The identification must be in writing and signed by you.
136
What is the 180-day limit in a 1031 exchange?
The replacement property must be received and the exchange completed no later than 180 days after the sale of the relinquished property or the due date of the income tax return.
137
What is the primary benefit of a 1031 exchange?
It allows you to sell an investment property and use the proceeds to buy another investment property without paying capital gains tax, as long as the funds are reinvested into a like-kind property.
138
What are the requirements for a 1031 exchange?
1) The exchange must involve real property. 2) The ownership must stay the same. 3) You have 45 days to identify properties and 180 days to close. 4) The purchase price must be equal to or greater than the sale price. 5) Professional guidance is necessary due to complexity.
139
What is the Comprehensive Energy Assistance Program (CEAP)?
CEAP combines case management, education, and financial assistance to help very low- and extremely low-income consumers reduce their utility bills.
140
What is the Weatherization Assistance Program (WAP)?
WAP helps low-income Texans, particularly the elderly and those with special needs, control energy costs and ensure a safe living environment by installing weatherization materials and providing energy education.
141
What is the Neighborhood Stabilization Program (NSP)?
NSP provides funds for the acquisition and redevelopment of foreclosed, abandoned, or vacant housing to create affordable housing and related activities like demolition and land bank creation.
142
What is the Amy Young Barrier Removal (AYBR) Program?
AYBR provides funds for accessibility modifications in housing for persons with disabilities earning up to 80% of the area median family income.
143
What is the Homeowner Rehabilitation Assistance (HRA) Program?
The HRA Program provides funds for the rehabilitation or reconstruction of substandard homes owned by homeowners earning up to 80% of the area median family income.
144
What does the Texas Department of Housing and Community Affairs (TDHCA) oversee?
The TDHCA oversees various housing programs, including rental assistance, homelessness prevention, and rental housing development, and regulates the manufactured housing industry in Texas.
145
What is owner financing?
Owner financing is when the seller finances the purchase of a home instead of using a traditional mortgage. The buyer makes payments directly to the seller, and the loan may be repaid or refinanced in a few years.
146
What are the advantages of owner financing?
It can be quicker and easier than traditional financing, especially for buyers who may not qualify for a conventional mortgage. It often avoids bank involvement and does not require an inspection or appraisal.
147
How can you finance property abroad?
You can arrange an overseas mortgage through your local bank, apply for a mortgage from an overseas lender, release equity from your current property, or pay in cash.
148
What is an overseas mortgage?
An overseas mortgage is a loan taken out on property outside your country of residence. It can be arranged through a local or overseas lender and involves unique considerations like foreign exchange and local laws.
149
What are the advantages of using a home-country lender for an overseas mortgage?
You can arrange the mortgage in your own language, avoid translation fees, and benefit from a quicker process due to your existing credit history.
150
What are some considerations when buying property overseas?
You must consider foreign ownership laws, tax rules, exchange rate fluctuations, planning permission, insurance, and how local laws may differ.
151
What is the restriction for non-residents purchasing property in Australia?
Non-residents need foreign investment approval unless they are buying a new dwelling or vacant lot, which must be developed within 4 years of purchase.
152
Can foreigners purchase property in Canada?
There are no restrictions on the amount or type of property a foreigner can buy in Canada, but additional taxes may apply in some provinces.
153
What are the rules for foreigners buying property in China?
Foreigners can purchase commercial real estate if they plan to occupy it themselves.
154
What is the situation for foreign property buyers in New Zealand?
New Zealand banned property sales to non-residents in 2018, except for Australian and Singaporean citizens due to free-trade agreements.
155
What is the "property-based citizenship" in Portugal, Greece, and Spain?
Foreign investors who buy a home and live in it for at least 5 years may be granted property-based citizenship.
156
What are the rules for foreign buyers in the US?
Non-residents with property not tied to a business or trade will usually be taxed at around 30%.
157
What is a foreign loan?
A foreign loan is typically issued by a foreign lender and may include bonds, treasury notes, or other debt instruments issued by a government. It can also refer to loans given to non-residents by foreign lenders.
158
How does China's debt holdings affect the US?
China holds significant amounts of US debt, leading to concerns over its influence on US foreign policy.
