Non-Recourse Lending
I get a lot of questions on how IRA investors can stretch their IRA dollars farther, particularly with a non-recourse loan. Therefore, I wanted to put together a brief outline of what one should expect as a guideline for non-recourse lending.
Most Non-Recourse lenders work exclusively in IRA funds, which can be a good thing as personal credit checks, although they occur, are considerably less of a factor than they are for investor loans or personal loans.
Interest rates currently for non-recourse loans average in the 6.75-7.75% range, with variable time periods of 2, 3, 15, 25 years. This too is considerably less than investor loans.
Now here is where non-recourse loans can become a burden. The loan is based on the property and it's income level. Lenders are looking for a 1.2:1 Income to debt ratio. Meaning, they are looking to lend on properties that are already performing.
Those are but three of the characteristics of a non-recourse loan.
Comments (3)
What precautions do you suggest for anyone carrying mortgage inside an IRA? A self directed IRA can be a great way to accumulate retirement but it can become complex and taxing.
Account Closed, over 14 years ago
When it comes to non-recourse, yes. Its probably not profitable to try and do a fix and flip in the IRA using non-recourse. There is all kinds of tax ramifications to with that.
Kevin Kaczmarek, over 14 years ago
Looks like it's good to pick up property with 10-15% discount in equity rather than a fix and flip then, correct?
Tom Bukacek, over 14 years ago