Article Side

Online Article Directory!

Hello Guest! Login or Register to submit articles!

IRA Loan—Loan-to-Value Ratio

By Corwin Smith Subscribe to RSS | March 29th 2012 | Views:
loading
 
  



When you apply for a non recourse loan against your self-directed IRA, the lender will examine the proposed loan’s LTV (loan-to-value) ratio before extending a loan. The LTV ratio enables lenders to assess risk on the loan. The loan-to-value ratio usually applies to loans borrowed for property investment. Because an IRA loan for property purchase falls in this category, it helps to know what kind of LTV ratio lenders expect for approving a loan request.

An IRA loan is riskier to lenders because the IRS requires it to be non recourse. This means it frees the borrower from personal liability in the event of loan default. Therefore, lenders usually offer an IRA loan only when the loan-to-value ratio does not exceed 65% for single family homes.

For condominiums, multi-unit properties, and apartment complexes, the loan-to-value maximum is lower, at around 60%.

Calculating Loan to Value

To assess if your IRA loan proposal is feasible, find out the loan-to-value for the IRA loan. Typically, the loan-to-value is the ratio of the loan amount to the value of the property.

Therefore, if you want to purchase property worth $100,000 and expect to borrow an IRA loan of $85,000, the loan-to-value ratio would be 85%. The LTV is too high, and it is unlikely that your loan application would be approved.

Take another example. If you want to buy the same property (worth $100,000) and need a loan of $65,000, the loan to value is 65%. This increases the likelihood of a favorable response from the IRA loan provider.

If you are planning to borrow $70,000 to purchase a condominium worth $100,000, the loan-to-value ratio is 70%. This is higher than the acceptable LTV on condominiums and multifamily dwelling units. However, if you are willing to offer a down payment of $40,000 and borrow only $60,000, the loan-to-value ratio becomes 60%, and the lender might be more willing to consider your loan request.

The loan-to-value cap may also be lowered if the lender feels that the property is a risky investment; that is, it does not yield good returns, requires too much investment, and cannot fetch sufficient rental. Other reasons for a reduced LTV could include poor condition of the property, a unique property, or unimproved property (land).

Investing Smartly

Usually, it is a good idea to scrape together the funds without taking out a non recourse loan if possible. Some people partner with relatives; others may clear out their savings to come up with the required capital. However, getting hold of the money through these channels is often difficult.

Many people are unaware that, in this situation, they can finance the property purchase in the self-directed IRA by getting a non recourse loan. While the lender provides 65% of the property price, you can use your IRA to fund the remaining 35%. Though this loan does not put IRA assets at risk, remember that it does put your IRA’s future ability to obtain a loan at some risk, so you have to invest wisely. Choose a property that requires minimum operating expenses such as maintenance, security, utility bills, tax, etc. and offers maximum returns in rent.

Before you approach the lender for an IRA loan, you need to have a self-directed IRA with at least the 35% of the property price invested in it.

A self-directed IRA loan allows the investor to buy property within an IRA without putting the IRA at risk (the property you buy can be foreclosed, but other IRA funds are not at risk from lenders). Because your IRA is also funding a portion of the investment, you need to select the property cautiously.

Corwin Smith - About Author:
For more information regarding IRA Loan, please visit Islandviewmortgage.com

Share on Facebook Tweet It Stumbleupon this post This post is delicious !

Article Source:
http://www.articleside.com/loans-articles/ira-loan-loan-to-value-ratio.htm

Related Loans Articles Subscribe to RSS

Fast loans for people with bad credit- Get money and relieve stress now!
Published by Abnir Bond on June 14th 2012 | Loans
If you are taking quick funds via fast loans for people with bad credit, you can easily get rid of a...
 
Unsecured loans for unemployed people- All purpose loans
Published by Nicholas Taweel on March 7th 2012 | Loans
Unsecured loans for unemployed people falls under the category of collateral free loans. These are m...
 
Doorstep loans fantastic currencies right in your doorstep with ease
Published by Shaun Smith on January 5th 2012 | Loans
Doorstep loans are feasible advances acquired right at your door in order to satisfy all your desire...
 
Money loans for people with bad credit- to help your financial needs
Published by Kenim Wids on June 18th 2012 | Loans
If you would like to relieve any fiscal stress immediately, it is better for you to avail money loan...
 
Ez loans- Perfect cash support for everyone
Published by Ricky Loyel on May 25th 2012 | Loans
If you got additional sum of money from ez loans, you can easily overcome fiscal worries....
 
6 month loans: Hold any Amount of Money with Ease
Published by Martin Bale on April 5th 2012 | Loans
6 month loans would take care of you when you are looking for some instant cash deals to lead a happ...
 
Logbook loans- Your Car Can Help You Raise Money
Published by Faustini Rodriguez on December 5th 2011 | Loans
Loans For Logbook help you borrow money if you own a vehicle. These loans are called logbook loans. ...
 
Unsecured debt consolidation loan: Payback all your debts by an individual loan
Published by Alan Poly on May 14th 2012 | Loans
Unsecured debt consolidation loan a economical company proovide some particular services before the ...
 
Checking account loans- Fight against financial hardships now!
Published by Honard Nork on April 21st 2012 | Loans
By getting quick cash through checking account loans, you can manage financial needs with the availi...
 
Same day loans- Would bring instant monetary relief
Published by Dee Power on March 6th 2012 | Loans
Usually, it becomes a tiresome effort to apply for the loans. The approval for most of the regular ...
 
90 day bad credit loans- Fast financial solution to meet fiscal worries
Published by Alesia Ace on July 3rd 2012 | Loans
Get quick cash up to $1500 via 90 day bad credit loans in order to overcome your financial needs now...
 
Short term loans for bad credit- Small financial help available for everyone
Published by Alex Abigil on April 28th 2012 | Loans
If you are taking instant funds via short term loans for bad credit, you can fight financial hurdles...
 
Teletrack payday loans- Get quick money without checking credit status now!
Published by Malen Cheks on July 5th 2012 | Loans
Without any hassle, you can avail for teletrack payday loans whenever you are in need of quick cash....
 
Next day payday loans: Speeding up your ability to pay!
Published by Arnold Arvel on May 30th 2012 | Finance
Next pay day loans are the excellent mode of attaining the financial resources for fulfilling the em...
 
Doorstep collection loans: Extremely Effortless Deals to Take
Published by Johntygolf on May 9th 2012 | Loans
if you want to see money delivered at your home, you can go with doorstep collection loans with no f...
 
Pay day loans over 6 months: Useful Deals to Crack
Published by Davis Mllen on May 31st 2012 | Loans
Pay day loans over 6 months are the useful deals that are tagged with lots of stunning features and ...
 
Instant loan- Financial solution to meet unexpected cash crisis
Published by Aden Jon on June 12th 2012 | Loans
Get quick cash via instant loan in order to combat against unexpected financial hurdles now!...
 
Bad debt loans- Great fiscal assistance for defaulters
Published by Keron Breson on December 14th 2011 | Loans
With the aid of bad debt loans, you can easily overcome financial issues without any hassle....
 
Small loans for bad credit- Improve your credit status
Published by Beidhi Ceeper on June 11th 2012 | Loans
By availing small loans for bad credit, you can fulfill unexpected fiscal worries without any hassle...
 
6 month loans - Take fund for longer period of time
Published by Aldis Roy on April 2nd 2012 | Loans
With the aid of 6 month loans, you can overcome financial woes within few days....