Can I get financing with this scenario?

Question

Loan Purpose:     Cash out refinance on investment property
Loan Amount:      $50,000
LTV:                     60-70%
Credit:                  760+
Assets:                 Greater than loan amount requested
Income:                NONE

Does anyone know a lender that will do a stated income loan without asking for tax returns?  I have great credit, plenty of assets, a low LTV (could even go down to a 50LTV), but no source of income.

Daniel Hart · Answer

Tracey,

How do you convert equity in a home into an annuity?  I realize that it may be Australia specific and I'm in the U.S., but I've never of converting home equity into an annuity, at least not without getting a conventional bank loan and buying an annuity.  I'm curious how that is done.

Daniel Hart · Answer

Peter, I dont understand your comment.  If I can qualify after a hard money loan then I should be able to qualify immediately.

Daniel Hart · Answer

I've been living off assets, but I don't have a steady stream of income from those assets, which is what lenders want to see.

Hard money is too expensive and short term - I'm trying to get long term financing so I can hold my rehab property as a rental.  I already have the money to do the fix, but I'm trying to at least get what I put into it back out so I can move on to the next.  I was hoping that maybe there were still some programs out there even if the cost was higher.

Tracey B. · Answer

As you anticipated, he did increase his borrowings to draw down, say, $10M in equity, and invested this in a defined term (also known as prescribed, or fixed term) annuity for 10 years. This guaranteed him an income of, say, around $1.06M per year for the next 10 years. If he was simply investing for interest, only the interest earned would be counted as income for DSR purposes, but by taking out an annuity, his lender was willing to view the entire $1.06M (ie principal repayments and interest, effectively) as income.  :cool:  This obviously substantially improved his DSR and allowed him to continue borrowing.

Even if it doesn't necessarily make sense from an investment perspective (ie the 6%-ish return isn't very attractive, and may even be less than his cost of borrowing the funds), the fact that it enabled him to continue expanding his portfolio was what made this such a great option for him.

Tracey B. · Answer

An investor buddy of mine in a similar situation got around it by converting some of his equity into an annuity. For example, he invested $500K for 10 years at x%, and got paid, say, $55K pa for 10 years. Many lenders (here in Australia, anyway) were willing to accept his annuity as income.

Peter Chung · Answer

unfortunately your only option is a hard money loan which can be very expensive.  You can then do a refi. to a conventional loan.

Ben Carmona · Answer

A stated income loan is not to fictiously state that you have income.  They are designed to state the income that you really make but write off.  Or maybe you make it but dont report all of it.

Anyway, if you dont have income how are you managing any debts?  Do you have any debt?

Probably going to need a hard money loan as commercial lenders want to know your overall debt service.