Flipping Houses?

[rcw]

Can you get an interest only loan for flipping houses to keep from paying a full mortgage for a few months while you fix up the house? Anybody have experience they want to share?

[flatscat1]

If you have an investment portfolio, you can look into what is called an LMA (loan management account.) Basically, your portfolio serves as collateral for the loan, really just a line of credit. Like margin, but for non-securities based investments. You can use the interest only line of credit on anything you want - you don't even have to disclose the purpose. You still maintain control over the investment portfolio (you can pretty much buy and sell as you wish) and as long as the investments stay on deposit (in some form) then the line of credit remains in place.

Here's the real advantage: If you go to a bank to borrow say $50,000 then they will loan you the money at an interest rate based on a $50k loan. You pay interest on this full $50k amount from that time until it is paid off. With an LMA, your interest rate is determined on your total portfolio, not the amount you want to borrow. So if you have $250K in a portfolio then your interest rate is based on $250k AND you only pay interest on the amount you use. So if in the first month you spend $10k of the $50k project, you only pay interest on the 10k that you have used.

This type of lending product is attractive as a bridge loan or alternative to margin. You can pay down the loan amount any time, no penalty. No fee to set up either. You should not use retirement assets (IRA or 401K) as collateral in my opinion.

[BondBroker1]

I'm not in the mortgage business but I know people do use IO mortgages for this purpose.

[robalo]

Flatscat Does Any Loan Office Offer That Type Of Loan? Or Is It Specific Locations (banks..etc..)

[Lezz Go]

I flip houses and we use Enterprise Bank in Houston (Jeff McHugh) for IO loans.

[VelShirley]

I can do interest only loans, helocs or hard money ...all types of laons. I'll be glad to help. Sne a pm or call.

[rodwade]

you could also get a construcion loan if you're remodeling. I know a guy here in corpus that did the same thing. FWIW though markets have slowed in Florida and california from what some others have told me. These were the leading indicators for the rise in the market, I'm willing to bet they are also the indicators of a market decline.

[berto]

is there any good websites i can read up on this? I wanna get into it on the side but have no idea on where to start

[THE JAMMER]

Have you actually figured out how much of your payment on an amortizing loan in the first 6 months actually goes toward principal?? It's peanuts.

On a $50k loan at 6.5%, amortized over 30 years the payment is $316.03 per month. Interest only would be $270.83. That's $45.20 per month x even 6 months is only $271.22. Not worth the effort.

THE JAMMER