Quote from @Patrick Roberts:
Quote from @Sarp Ka:
Quote from @Patrick Roberts:
Am I understanding this correctly that youre expecting to get a $700k property for $500k because youre paying cash? Or are you using an SBLOC to bring $500k and then bringing another $200k in cash out of pocket? I also doubt very seriously that any brokerage/custodian is going to allow this kind of loan with 401k assets; it's likely going to need to be a 401k general purpose loan, which is highly regulated (as someone else mentioned).
Every market is different, but paying cash doesnt necessitate a huge reduction in price - it might, or it might just make the offer more competitive than other bids that require financing.
I recommend you speak with a lender about reviewing whether you could qualify for a loan prior to making an offer, as I've seen these kinds of things blow up. I've received apps in the past where this was the exact situation only for the borrower to not qualify and be stuck.
What I've had clients do in the past is make an offer without a financing contingency where they tell the seller that they are getting a mortgage to close the deal, but also provide proof of assets to show that they can/will close by liquidating the assets if the loan gets declined. A smart seller/listing agent will likely require a large EMD to tie you to performing on your offer, so be prepared for that.
No, in this particular case it's not 700k property being sold as 500k if it's offered cash.
Cash offer in my case helps with 30-40k. So I'm basically trying to explore if i can borrow money in an alternative way than conventional loan. Even 600k loan at 10% interest costs $165 a day. Holding this for 1 month (hoping that's enough to refi) that's $5k.
So my aim is to save money overall by making a cash offer and close it soon. Then refinance it.
I just don't have that amount of "cash" but i have enough as collateral.
I guess Im not really understanding what youre looking for. If you want to close with cash, it sounds like youre going to have to liquidate your collateral or borrow against it, which will likely be more expensive that a mortgage. If youre wanting to make a cash offer, all I can say is that Ive never seen a competent seller/listing agent accept a cash offer without proof of funds, meaning a bank statement or similar document(s) showing liquid cash for closing. I cant speak for what this seller will or wont do, but my suspicion is that an offer accompanied by a balance sheet or list of collateral and not liquid funds wont fly - it wouldnt with me. The whole point of a cash offer is speed and certainty - if you can bring a pile of money to the closing table today, I dont have to worry about you not getting the money to close. If you cant close the deal without borrowing money or selling stuff (which both frequently take time), then its not a cash offer until those funds have settled in your account.
If you are going to borrow money, a 15yr or 30yr mortgage is probably going to bring the lowest interest rate available. Most margin loans and SBLOC are Prime + or FFR +, and the ones Im familiar with are 8-13% right now.
The only other thing I can think of is that if you're a HNW with a good relationship with your private banking team, maybe theyll give your a personal line based on your net worth and assets with them.
I'm finding it a little hard to understand why it's more expensive to do this way?
Assume that i got margin with IBKR their calculation shows 5.4% and costs 21.8k per year for 400k.
So assuming property is 700k with conventional loan and 670k with cash offer.
I manage to find another 270k (this is what I'm asking) without paying any origination fees. Let's say at 13% interest. That's 35k per year.
35+22k is 57k per year.
Assume that i can refinance in 45 days. That's 7k loan.
So this is overall costing me 577k to purchase instead of 600k.
My question is where do I get a loan like the one I mentioned above. The one that's short term and don't cost me a lot to initiate/originate. Just like my margin accounts.