40 year mortgage option

[Michael A.]

I’ve been researching alternative financing options for my second property. I have seen that New American Funding, Newfi, and Griffin Funding have a 40 year mortgage with the first 10 years being interest only while the remaining 30 years are a fixed rate. I’m located in Austin and a loan option such as this one sounds attractive in this highly appreciating market. I understand the opposition towards this type of loan product but I feel that this option is good for folks like myself who are limited on funds but would like to invest in RE for the long term. Having the extra money the first 10 years will help us stabilize until we’re ready to rent out the house and will give us the opportunity to perhaps save for another property instead of parking money in the house itself. If the interest rate is in fact fixed after the initial 10 years, does anyone know if the rate will be predetermined prior to closing on this 40 year loan? Or will the interest rate be determined later in the future? I’m wondering if I could perhaps secure today’s rates despite this being a hybrid type of loan. I have no plans of selling within the next ten years and will likely pass this on to my children . If anyone has any additional info about such loan products in the Austin area please kindly share any details you might have. Also, I’d love to hear what others have to say about such option whether they are in Texas or beyond. Thank you in advance.  

[Joe Villeneuve]

Deals are made...not found.  Deals are deals because of two components:

1 - Minimal cost to the REI. This isn't the purchase price. It's the cash that comes out of you pocket. This should be restricted to only the DP. Negative CF adds to your cost. I would never buy a property with negative CF. What's the point?

If a market has negative CF, I won't invest in that market.  It's just that simple.  There are too many markets the do cash flow...big time CF too.

2 - The Terms for how someone/something else pays for the rest of the property cost.

Even areas where it looks like there is no chance to get positive CF at the start, there could be ways to make that happen.  All you need to do is learn real strategies, invest in the correct market, and have a plan based on a series of connected financial steps to achieve your specific financial goals.

Like I said in the first statement above.  Deals are made, not found.  Deals are made from opportunities found, where you use the correct strategy to make that deal happen.