100% equity in home… need loan advice?
hey all,
i’m a 21 year old college student majoring in music (production/recording). i just purchased my 1st home cash/outright.
i lost my mom in 2001 when i was 13 and used the modest life insurance policy she left for me to purchase the home. after losing my mom i moved in with my grandmother and lost her in 2004 after a year long battle with cancer. she left me a 1400/mo inheritance which i have been using for my education and related expenses. this $ is from her interest in a family business and will continue uninterrupted until her siblings sell the 2 commercial buildings they own and rent out. unfortunately i am a silent partner with no voting power and/or the ability to borrow and/or cash out of my interest in the co.
i have 100% equity in this property and its TAX ACCESSED value is 200k. just before i purchased the property i bought (cash/outright) 50k of landscape equipment and will be self employed/full time in the spring of 09. my education is almost complete…1 more semester and will continue on a part time basis. at this moment i have 10 weekly customers (800/wk or 3200/mo) and am looking to increase that # to 20-25 by spring. my property will also generate income…it consists of a 4br house, 2 br cottage, 2 car garage and is zoned "village commercial". with this zoning, there is an option to rent part or all of the property to certain types of business… pottery shop, general store, real estate office, bar/restaurant, etc. i have a couple ready to sign a contract for the cottage (1200/mo) and 2 roommates to share the house with me (600ea/mo). i also have the option to rent out a small commercial suite on the 1st floor of the house (1000/mo). my long term plan is to use this (comm) space for my professional recording studios… not ready ($).
although i do not "technically" have a declared income (yet), can i get a 100k loan using my property as collateral? moreover, can i use the rental, inheritance and landscape as income NOW, or how long do i have to wait to "technically" be considered a landlord and/or small business owner? i know i can handle this loan without any problem just with what i make right now. sad thing is… had i closed just a few months prior, it would have been "rubber stamped" by any bank and/or mortgage co. the way i found the property right up to the closing was done unconventionally… i am UNAFRAID to think and/or act out "outside of the box". any information and/or suggestions will be greatly appreciated. hope all is well. have a good one.
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3 comments
Chillin K on September 17, 2009 at 9:26 am
Unless you absolutely have to have cash, getting a loan is not a great idea.
You’re doing all the right things, but you may want to consider incorporating a business and transferring your assets to the corporation. This will protect you personally and give you some options that you don’t have right now. You can draw a salary from the corporation, which will give you income that you can show. Also, you will pay for everything with pre-tax money, and make your own decisions about how much you want to show as profit (and pay taxes on that money ) and how much to pump back into the business. As an owner of a corporation, you are not self-employed. You are hired by the company as an employee. You will have 2 separate entities, yourself and the corporation, with 2 separate credit scores.
Bettie M on September 17, 2009 at 9:26 am
I just negotiated a refinance on my home today with my current mortgage lender. They asked for proof of income – w2’s for the last two years, plus pay stubs for the past two months. They also wanted proof of liquid assets. I am an existing customer with excellent credit. I assume that your lender would want at least that much. In addition lenders will check your credit. A good credit rating means better interest rates and terms for your loan. You should consider getting your income stream in place prior to borrowing money. You also need to look into establishing credit by opening a credit card account, etc. Having said that, why not just go on-line and fill out a home equity loan application with a mortgage lender. Someone will contact you and be able to give you the info you seek.
Jerrold J on September 17, 2009 at 9:26 am
Cillin K has given you GREAT advice and the only thing I would add is WHY do you need the loan? You will ahve a hard time getting a loan based on lack of employment income, new business, etc and that means a higher closing cost for the loan and higher interest rates. You need to have a purpose for the loan that will generate a higher rate of return then those funds cost you so without knowing where you will spend the money; getting a loan is not a great idea.