Archive for May, 2010
May
30
The Top 12 Commercial Mortgage Loan Problems To Avoid
Posted by: | CommentsThis article describes 12 recurring commercial mortgage problems that commercial borrowers and their advisors need to anticipate before it is too late. The following problems are common in traditional bank commercial real estate loans and should be avoided if feasible (special circumstances will periodically make some of these terms unavoidable).
Key Problem Number 1:
Tax Returns versus Stated Income
Most traditional banks will require several years of tax returns in order to qualify for a commercial real estate loan. The alternative is to use a Stated Income Lender that does not verify personal income or assets. Many borrowers will simply not qualify for a commercial mortgage loan if tax returns are used due to high business expenses (and low net income). Many lenders using tax returns will also continue to verify income after the loan closes. Stated Income Lenders will not engage in this practice.
Key Problem Number 2:
Special Purpose Properties
It is becoming increasingly difficult to get commercial loans for special purpose properties. Properties that do not fall in the categories of apartments or retail/office buildings are often placed in this special purpose classification. This means that business acquisition loans for commercial properties such as restaurants/bars and auto service businesses are frequently hard to find. Commercial financing will be even more difficult to locate for such specialized properties as churches, funeral homes, nursing homes and assisted living facilities.
Key Problem Number 3:
Recall/balloon features
These terms are used by many banks to effectively shorten most business acquisition loans to 3-7 years.
Key Problem Number 4:
Short-term loans (less than fifteen years)
15-40 Year Commercial Property Loans without recall/balloon features are available.
Key Problem Number 5:
Up-front Commitment fees
Under most circumstances, commercial borrowers should not pay such a fee. Please note that processing/retainer fees are not included in this discussion of commitment fees. Processing/retainer fees should be viewed as an acceptable and standard business practice when dealing with commercial loans.
Key Problem Number 6:
Business Plans
Under most circumstances, commercial borrowers should not use a lender that requires a business plan.
Key Problem Number 7:
Cross-collateralization
Commercial borrowers should not be required to use their personal assets as collateral for a commercial property loan.
Key Problem Number 8:
Sourcing and seasoning assets. Seasoning of ownership.
This particular problem will not be relevant to all business borrowers. However, if it is relevant, you should seek out a lender without sourcing and seasoning requirements or limitations. Most banks have strict guidelines for sourcing and seasoning of assets or ownership to qualify for commercial real estate loans. For a purchase, commercial lenders will frequently want documentation about where the down payment is coming from (sourcing). Commercial lenders will also frequently have very specific requirements stipulating that the funds must have been in a specific account for a specific period of time, often 3-6 months or longer (seasoning). Seasoning of ownership is similar to seasoning of funds, except this requirement involves the minimum time someone has owned a commercial property before they can refinance the property.
Key Problem Number 9:
Requirement to sign IRS Form 4506
IRS Form 4506 authorizes the lender to obtain a borrower’s tax returns directly from the IRS. This form is routinely required by most traditional banks and many other commercial lenders for a business acquisition loan. Commercial borrowers using a Stated Income Lender with Limited Documentation Requirements will avoid this requirement.
Key Problem Number 10:
Debt Service Coverage Ratio (DSCR) in excess of 1.2 for a business acquisition loan
The most flexible approach to DSCR for a commercial property loan will require a DSCR in the range of 1 to 1.2, with exceptions permitting a DSCR less than 1.
Key Problem Number 11:
Minimum commercial property loan size that is too high for your commercial mortgage needs.
It is not unusual to encounter a minimum commercial loan requirement of $500,000 to $1,000,000.
Key Problem Number 12:
Excessive length of the commercial real estate loan process
Many traditional banks require three to nine months to close a commercial mortgage. A more action-oriented commercial lender will close a commercial mortgage loan in 45 to 60 days.
For a free online six-part commercial mortgage course that addresses all of the problems described in this article, please visit http://steve.bush.googlepages.com/course or http://aexcfgllc.com for free enrollment information.
Ï © 2005-2006 AEX Commercial Financing Group, LLC Ï All Rights Reserved Ï
Rent Back
May
08
Top 10 Home Insurance Myths Debunked
Posted by: | CommentsMyth #1: Standard home insurance covers flood damage.
Fact: Standard home insurance does NOT cover damage caused by a flood. If you feel that you need coverage for a flood you should purchase a separate flood insurance policy.
Myth #2: The Medical Payment portion of my homeowners insurance will cover injuries to me and my family.
Fact: MedPay, a common feature of standard home insurance policies, is there to protect you in the event that someone other than you or your family (a neighbor, friend, etc) gets hurt on your property and they do not want to sue you. MedPay will typically cover up to $1,000 for each covered claim to someone outside of your family. If you or your family, however, gets hurt on your property they are not covered by your home insurance policy.
Myth #3: If my home is ever lost, my insurance company will reimburse me for whatever I tell them I owned at the time of loss.
Fact: In the event of a covered loss your home insurance company will ask you to make a list of everything you own and include specific details such as purchase price, date of purchase, serial numbers, etc. (Imagine trying to do this from memory!) The best way to avoid this situation is to have a home inventory already put together. Use a checklist like this one: http://homeinsurance.com home insurance home inventory checklist. Make sure to include photos, receipts, serial numbers and anything else that will help you prove ownership. Don’t risk not having everything replaced in the event of a disaster. Make sure to keep your inventory in a fire proof safe or at a friend’s house so it is still around when you need it!
Myth #4: If I file a home insurance claim, my home insurance premium will definitely go up.
Fact: While many home insurance companies do look at your claims history, there are many other factors that determine how much you will pay for home insurance. Filing one claim over a period of a few years might not increase your home insurance premium. To be on the safe side, always think twice before filing a claim for minor damages to your home. Consider your deductible. If the total cost of repair is not too much more than your deductible you might want to consider paying for the repairs yourself. While this might cost you more upfront, it might save you from an increased premium. If, because of a stroke of bad luck, you have to file multiple claims over a period of a few years and your premium is steadily increasing, rest assured there are other ways to save on your home insurance. Ask your agent about home insurance discounts. Sometimes simply installing a smoke alarm, burglar alarm system or by adding your auto policy to your home policy, you can save a great deal of cash.
Myth # 5 All of my valuables- like jewelry -will be covered in the event of a burglary.
Fact: There are limits on the amount of coverage you can receive for valuable such as jewelry, furs, etc. For example, most companies put a cap of $1500 on total jewelry lost during a burglary of your home. If you find that your jewelry values over $1500 you should talk to a home insurance agent and schedule an endorsement on your policy giving you additional coverage.
Myth # 6: My home insurance covers mold and/or other issues related to lack of maintenance.
Fact: Actually, a standard home insurance policy does not cover issues related to a lack of maintenance. For example if a plumbing leak that was left unfixed caused mold to grown in the interior walls of your home- mold removal and remediation would NOT be covered in your home insurance. Remember that your home insurance only protects you from damage caused by covered perils such as wind, hail, lightening, fire and theft. Keeping your home well maintained and safe for others is your responsibility and your home insurance company will decline coverage for maintenance related claims.
Myth #7: Flood Insurance is only for people who live in a flood zone.
Fact: Lending institutions, such as the bank that holds your mortgage, will require you to obtain flood insurance if you live in a major Flood Zone. However, keep in mind that all homes are at the risk for flood and standard home insurance policies do NOT cover flood related damage to your home. Due to the recent flooding in the Midwest the importance of this type of coverage for homeowners outside of a major flood zone has become even more apparent. If your home is flooded and you do not have flood insurance you will be on your own to replace your home and its contents. Flood insurance is a wise idea for every homeowner.
Myth #8: I will have to skimp on my coverage in order to save money on my home insurance.
Fact: Saving on your home insurance does not mean that you have to give up important parts of your coverage. It is very important to always be adequately insured in the event of a loss. However, there are lots of ways that you can save money on your home insurance that do not involve changing your coverage. Home Insurance discounts are available for homeowners who use burglar alarms, smoke alarms, deadbolts and other protective devices. Want more savings? Ask your agent about combining your home insurance and your auto insurance policies- you can usually save up to 15% this way.
Myth #9: When determining my coverage, I should use the purchase price for my house as my dwelling coverage amount.
Fact: A common mistake when homeowners are getting quotes for their home insurance is that they use the purchase price of their home to determine their dwelling coverage. Yet, the purchase price of your home includes the land under your home- which does not need to be replaced in the event of a fire or other peril to your home. For this reason, your dwelling coverage should always reflect the replacement cost of your home- or how much it would cost to rebuild your home in the event of a total loss. To determine this amount, multiple the sq. footage of your home by local construction costs. You can use a http://homeinsurance.com/calculators/ home insurance calculator to help you determine the amount if necessary.
Myth #10: You can not buy a home without purchasing homeowners insurance.
Fact: This is a tricky one. Because while you actually CAN buy a home without home insurance (a lender may not require it or you may, although rare, pay cash for the home) you should still always have home insurance on any property you own. Whether a lender requires it or not, the risk is always there. It would only take one fire or lightening storm to destroy your home and leave you uncovered.
Sell House Quick
May
06
Home Insurance in the UK - Protecting yourself From a Financial Disaster
Posted by: | CommentsIt is absolutely vital in this day and age that homeowners consider the purchase of home insurance in the UK. This form of insurance is designed as a means of protecting one’s home, and the furniture and other belongings that are found within. There are a variety of different types of home insurance available to residents of the United Kingdom, and it is important to understand what each policy offers and at what cost those benefits are offered at.
UK residents seeking home insurance should understand that there are five basic facets to home insurance cover; buildings, contents, personal possessions, pedal cycles and legal protection for home emergencies. The aspect of home insurance in the UK that covers the actual building itself is the only facet that is found in all forms of home insurance cover, with the other four facets acting as optional additions to your home insurance plan.
Buildings - This part of your home insurance coverage in the UK covers all aspects of the home’s structure and exterior, including walls, drives, roofs, patios, permanent fixtures and outbuildings. The average home insurance policy in the UK covers fire, storm, flood, theft, subsidence, malicious damage, theft and even the escape of water.
Contents - This is an optional facet of the average home insurance policy, covering household goods like carpets and curtains that are fixtures and fittings but that are not permanent. This insurance policy also covers personal belongings found in sheds, garages and within the home, including money but only up to the amount of £300. Just like with the Buildings facet of the average home insurance plan, you will be covered against fire, storm, flood, theft, subsidence, malicious damage, theft and even the escape of water.
Personal Possessions - This facet of the home insurance policy is designed to cover items that are worn, or otherwise carried, or items that are taken out of the home such as cameras, sporting equipment, money, musical instruments and jewelry. This facet of the average home insurance policy covers accidental loss or damage and theft both anywhere in the United Kingdom, and also anywhere else in the world for up to sixty days in most cases.
Pedal Cycles - This is another optional extra facet of home insurance in the UK, covering against accidental loss, accidental damage and theft both anywhere within the UK, and for as many as sixty days anywhere else across the world.
Legal Protection in Home Emergencies - Another optional form of home insurance, legal protection in case of home emergencies offers claim assistance and supports legal costs for up to £50,000 which is capable of handling personal injury claims, employment disputes, property disputes and contractual disputes as well.
Home insurance in the UK is more important than ever these days, so if your home is not yet protected, it is vital that you choose a policy that covers your home and other possessions now before an accident or theft occurs and it is too late to protect your belongings.
Repossession
May
04
Home Mortgage Loan - Tips for Reviewing Loans
Posted by: | CommentsWhen you are in the process of obtaining a home mortgage loan, there are undoubtedly many aspects of the process that are new to you. The language that applies to loans, for instance can be different from the meaning applied to the same term in everyday life. It is far better to review each clause of the prospective loan document as soon as you have access to it and make certain that you understand the terms that are used and how they apply to your own financial situation. Here are some concepts regarding your loan that will be important in ensuring your loan package is acceptable in the long run.
Overall cost of the loan
There are many aspects that go into determining the loan cost on your home mortgage loan. The interest rate, mortgage type, loan fees, and term of the loan are just a few of these. You may understand the words, but it is important to take a look at what the words will cost you in dollars and cents. Even a few dollars less in the early stages of a loan can save you thousands of dollars over the entire loan period. It’s important to take advantage of such savings.
Mortgage type
The basic mortgage types that are common when you apply for a home mortgage loan include the fixed rate mortgage, the adjustable rate mortgage, reverse or negative equity mortgages and interest only mortgages. Each of these has advantages and disadvantages and you are the best equipped to determine whether the type of mortgage will work for you. The important factor is that you review the documents and proposals so that you know precisely which type of loan you are getting. Being surprised in a few months by a two to five hundred dollar increase in your monthly payment due to an adjustable rate mortgage can result in the loss of your home.
Interest rate
When reviewing the loan documents for a home mortgage loan, one of the important factors that you should check and understand is that of interest rate on the loan. Mortgage interest rates can vary from low to high, depending upon such other factors as the type of loan, applicable usury laws, credit rating, term of the loan and others. Review the stated rate and make certain it is what was agreed upon. If you are expecting a fixed interest rate and the documents provide for an adjustment in 24 months, chances are good that the mortgage has been prepared with a variable interest rate.
Broker’s reputation
Actually, checking the broker’s reputation should come well before preparing or reviewing the documents for your home mortgage loan. Sometimes though, you won’t see a problem until you actually get the documents in writing before you. If there is anything that is unclear or incorrect, the time to get the problem corrected is before signing. A reputable broker should be willing to work with you to correct problems or clear up any communication issues.
Quick House Sale
