Asset-based mortgage loans offer a beacon of hope for asset-rich borrowers who prefer not to liquidate their assets for purchasing properties. These unique financial instruments provide a perfect blend of flexibility and asset preservation, allowing you to tap into your wealth without having to sell off your valuable assets. So, if traditional loans don’t quite match your financial profile, this type of loan could be your ticket to seamless real estate acquisition.
What is an Asset-Based Loan?
Asset-based mortgage loans- sometimes referred to as Asset Qualifier loans – are a financial instrument designed with a unique clientele in mind. These individuals are often:
- Rich in assets but reluctant to liquidate these assets for purchasing real estate.
- Unable to provide adequate proof of income via W2s or tax returns to qualify for conventional loans.
In these instances, these types of loans offer a tailored solution, enabling borrowers to leverage their wealth without having to deplete their investments, especially in a bear market.
Asset-Based Loan Meaning – What Does it Truly Signify?
Understanding these loans requires knowing what “assets” are in this context. These could be cash savings, stocks, bonds, real estate, or other forms of tangible property. The core idea is that you’re using these assets as collateral to get a loan.
For instance, you can use your home as collateral. What’s great about this loan type is its flexibility, allowing you to leverage your assets for various financial goals.
Asset-Based Mortgages: A Deep Dive
Asset-based mortgage loans may come with marginally higher interest rates compared to traditional Fannie Mae loans, but they require just a 20% down payment. This balance makes them an attractive alternative for borrowers who wish to preserve their asset pool.
A common misconception about asset-based mortgage loans is the need for colossal assets. At JVM Lending, we debunk this myth with our approach. For one of our premier asset-based loans, we require assets equivalent to the property’s purchase price, 60 months of consumer debt payments, six months of housing payments, and closing costs.
To put this in perspective, consider a property purchase worth $600,000. The total assets required for a borrower with monthly consumer debt payments of $1,000 would be approximately $700,000. This figure is attainable for many borrowers and demonstrates that an asset-based mortgage loan isn’t as daunting as it initially seems.
Advantages of Asset-Based Mortgage Loans
These mortgage loans come with their unique set of advantages, making them an attractive choice for many:
Flexibility
The primary advantage of an asset-based mortgage loan is flexibility. This type of loan allows borrowers to use their assets without needing to liquidate them, granting them the freedom to invest in property without disturbing their investment portfolio.
Ease of Approval
These loans are often easier to approve than traditional loans. Since the loan is secured against the borrower’s assets, lenders typically face lower risk. This lower risk can translate into a smoother and quicker approval process, making it an attractive option for borrowers who want to fast-track their property purchase.
Potential for Larger Loans
Since these loans are based on assets, borrowers who possess substantial assets can access larger loans than their income or credit score might otherwise permit. This feature can be particularly beneficial for high-net-worth individuals looking to invest in more expensive properties.
Potential Drawbacks of Asset-Based Mortgage Loans
Like all financial instruments, asset-based mortgage loans come with certain potential drawbacks:
Higher Interest Rates
Asset-based mortgage loans tend to have higher interest rates than conventional loans. This difference is due to the greater risk assumed by the lender given the focus on assets over income for loan approval.
Risk of Asset Loss
The most significant risk with asset-based loans is the potential loss of assets if the borrower defaults on the loan. It’s crucial to ensure that you have a solid plan for loan repayment to safeguard your assets.
View mortgage rates for
May 1, 2024
Frequently Asked Questions
Who are asset-based mortgage loans suitable for?
Asset-based mortgage loans are ideal for individuals who are rich in assets but do not wish to liquidate these assets to buy real estate or those who cannot provide sufficient income proof via W2s or tax returns to qualify for conventional loans.
Are the interest rates for asset-based mortgage loans higher than traditional loans?
Yes, typically, these loans have slightly higher interest rates compared to traditional loans due to the greater risk assumed by lenders. However, these rates can be offset by the potential financial benefits and flexibility these loans offer.
How much do I need to put as a down payment for an asset-based mortgage loan?
For these loans, you typically need to put down a 20% down payment.
What assets are considered for an asset-based mortgage loan?
Assets considered for these loans can include bank accounts, investment portfolios, retirement accounts, and other real estate properties.
Is there a risk of losing my assets with an asset-based mortgage loan?
Yes, if a borrower defaults on an asset-based mortgage loan, there is a risk of losing the assets used as collateral. It’s crucial to have a solid repayment plan to avoid this scenario.
Can I get an asset-based mortgage loan from JVM Lending if I don’t have substantial assets?
At JVM Lending, we have flexible requirements for asset-based loans. We require assets equivalent to the property’s purchase price, 60 months of consumer debt payments, six months of housing payments, and closing costs. Please get in touch with us to discuss your specific circumstances and explore available options.
How To Apply For An Asset-Based Mortgage Loan
In our mission to cater to a broad spectrum of financial situations, we also offer several other loan options. We firmly believe that everyone’s financial circumstances are unique, and we’re committed to finding the loan program that best aligns with each client’s specific needs.
To get started, fill out JVM lending’s loan application here.
Asset-based mortgage loans offer a path for asset-rich borrowers to venture into real estate without disrupting their investment portfolios. These loans, though slightly more expensive, provide a flexible and efficient avenue
These loans are a fantastic tool for savvy real estate investors and homeowners alike. Their potential to open up new avenues of financial flexibility and growth is certainly worth exploring. For more information, call JVM Lending at (855) 855-4491 or schedule a call with us to learn more.
