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

Bad debt loans: Money in an Easy Method with No Credit Issue
Published by Martin Maxie on June 25th 2012 | Loans
Bad debt loans are life-savior deals for every UK based person who is not capable to make adjustment...
 
Instant payday loans- Fulfill immediate need of cash
Published by Rocky Ales on April 27th 2012 | Loans
If you need urgent cash before your received monthly salary, it is better for you to grab instant pa...
 
Short term installment loans- Easy loan with easy repayment option
Published by Riyt Leson on June 22nd 2012 | Loans
If you are willing to avail quick cash, you can borrow instant funds via short term installment loan...
 
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....
 
Self Employed loans- Quick financial reliever for self-employed
Published by Roben Dacon on January 23rd 2012 | Loans
For those self-employed persons who hurdled with fiscal woes, they should availSelf Employed loans t...
 
Payday Loans- Suitable loans for small economic expenses
Published by Steve Kobzeff on March 6th 2012 | Loans
Thus this article states that payday loans are short term quick loans. You can avail it without hass...
 
Long term bad credit loans- Use availing money for longer period of time
Published by Jaker Kmith on June 16th 2012 | Loans
By availing long term bad credit loans, you can utilize money for longer period of time to meet cash...
 
Paper Check loans- Ideal financial help for borrowers
Published by Luck Wright on April 7th 2012 | Loans
If you are getting instant funds through Paper Check loans, you will achieve instant financial needs...
 
Instant text loans via simple click
Published by Andric Jones on January 2nd 2012 | Loans
Instant text loans will make sure that the borrower will always have to achieve the best results out...
 
Debit card loans: Make the Best Usage of Your Debit Card to Arrange Money
Published by Kelvin Lopez on July 7th 2012 | Loans
Debit card loans are made just to help you in a very confident and secured manner where you have no ...
 
Urgent cash loans: Fruitful Deals to Crack
Published by Albann James on May 23rd 2012 | Loans
Urgent cash loans have become the fruitful deals for you to partake in them anytime and anywhere whe...
 
Check advance loans- Get money and resolve unexpected fiscal needs
Published by Vikon Nail on May 21st 2012 | Loans
By availing quick cash from check advance loans, one can easily meet unexpected fiscal worries with ...
 
Pay day loans Georgia- Batter financial help available online today!
Published by Honard Nork on May 22nd 2012 | Loans
By availing pay day loans Georgia, you can easily meet unexpected financial crisis without any delay...
 
Short term loans for bad credit- Get cash without any credit check
Published by Janet Hatta on February 13th 2012 | Loans
Any borrower, satisfying some simple criteria, can apply for short term loans for bad credit, and ge...
 
Cheap cash loans- Valuable financial help available online
Published by Denis Deny on July 12th 2012 | Loans
In fact, cheap cash loans are ultimate financial solutions to meet cash hurdles. So, never miss out ...
 
Online same day loans no paperwork: Easy Process of Availing Money
Published by Gillbert Alvi on July 25th 2012 | Loans
Online same day loans no paperwork is a faxless deal where you save your time and enjoy swift cash t...
 
Student loans with bad credit- Perfect credit support for students
Published by John Simen on July 2nd 2012 | Loans
If you are availing quick funds via student loans with bad credit, you can meet higher education in ...
 
12 month payday loans in the UK with Low Interest
Published by Moon Thomas on January 8th 2012 | Loans
Moon Thomas is a name well known in the world of finance and has several notes and research on the d...
 
Small loans bad credit- Useful and reliable loan deal for you
Published by Beidhi Ceeper on June 1st 2012 | Loans
By acquiring quick cash via small loans bad credit, you can easily fulfill your financial worries....
 
30 day payday loans- Quick solution for your financial problems
Published by Bailey Molton on January 5th 2012 | Loans
Presently, 30 day payday loans can be availed with simple and quick online process. These loans are ...