FIRE/Home Loans

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kmn99
Posts: 37
Joined: Mon Dec 03, 2018 6:09 pm

FIRE/Home Loans

Post by kmn99 »

Folks on F.I.R.E:
How are you able to get Home loans or HELOC loans. I tried Asset depletion loans, you have to put down 35% and interest rates are above 5%. Trying to invest in the housing boom if I can get loans at interest rates under 3/3.5% . Otherwise, I am fine with the 3 fund portfolio. If anyone on FIRE was successful in the recent past getting regular interest rate loans, please post here. Thank you.
aristotelian
Posts: 12277
Joined: Wed Jan 11, 2017 7:05 pm

Re: FIRE/Home Loans

Post by aristotelian »

My approach is that if I am FIRE (or close) I don't need to borrow money.
Marseille07
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Joined: Fri Nov 06, 2020 12:41 pm

Re: FIRE/Home Loans

Post by Marseille07 »

Same as the poster above. It is important to buy a property before or as you start FIRE. Investing in the housing boom after FIRE is probably not practical; why do you want to anyway when you supposedly have enough in your portfolio? It's not so obvious if housing investing beats S&P500, while you're certain to consume your time & energy fixing it up or handling tenants.
WillRetire
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Joined: Mon Jun 05, 2017 10:01 am

Re: FIRE/Home Loans

Post by WillRetire »

Try a margin loan at Interactive Brokers (rates well under 2%), or an asset-based loan like Schwab's "Pledged Asset Line" (PAL) which unlike a margin loan cannot be used to trade securities, but can be used for anything else that a margin loan can (to my knowledge). Schwab's PAL rates are not as low as Interactive Brokers margin rates, but if you give them at least $250K in securities, the rate is currently 3.4% or lower.

To my knowledge, neither one is tax-deductible as mortgage interest, nor are the rates fixed over time. However, margin loans like Interactive Brokers' may get some favored tax treatment as an investment expense*. (*)This is not tax advice; just a wild-guess from reading the internet.

There are many threads on this forum about Schwab PAL, and also Interactive Brokers' margin rates.

I haven't figured out how to use assets to qualify for a mortgage without a liquidation plan. I hear it is possible.
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kilowattcorn
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Joined: Sat Jun 18, 2011 5:26 pm

Re: FIRE/Home Loans

Post by kilowattcorn »

There is a good chance that any independent mortgage broker will be able to find you an asset-backed loan. I got prequal for one in the PDX area a few months ago (based solely on assets, with zero income) though the rates were not as good as an income-based qualification (5.5ish) and it was a little awkward to get the loan details (such as whether there was a prepayment penalty). This particular lender did not require that the assets be moved from Vanguard, and did not require anything near 35% down.

Some credit unions will also do asset backed loans (patelco being one, I think?) but they seem to generally require you move assets to a specific broker.

They are out there, just gotta look around. There is less standardization of terms and names than with traditional mortgages so they are a little harder to talk about.
Topic Author
kmn99
Posts: 37
Joined: Mon Dec 03, 2018 6:09 pm

Re: FIRE/Home Loans

Post by kmn99 »

Thank you all. I was able to get a HELOC at a sub 3% rate. Still searching for the first mortgage lender:-)
Average Investor
Posts: 378
Joined: Fri Jul 13, 2012 11:27 am

Re: FIRE/Home Loans

Post by Average Investor »

I currently have an asset-based refi in process at rocket mortgage. Chase bank also offered to lend based on assets only.
Tomorrow never knows.
fortunefavored
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Joined: Tue Jun 02, 2015 8:18 pm

Re: FIRE/Home Loans

Post by fortunefavored »

Average Investor wrote: Tue Aug 03, 2021 7:12 pm I currently have an asset-based refi in process at rocket mortgage. Chase bank also offered to lend based on assets only.
how much equity and what interest rate? I keep following these threads to dead-ends (3 to 4% ABOVE conforming rates, large down payments, etc), so I am always curious if anyone actually gets the mythical "same or better rate" as conforming loans without ANY W2 income.
Average Investor
Posts: 378
Joined: Fri Jul 13, 2012 11:27 am

Re: FIRE/Home Loans

Post by Average Investor »

fortunefavored wrote: Tue Aug 03, 2021 7:48 pm
Average Investor wrote: Tue Aug 03, 2021 7:12 pm I currently have an asset-based refi in process at rocket mortgage. Chase bank also offered to lend based on assets only.
how much equity and what interest rate? I keep following these threads to dead-ends (3 to 4% ABOVE conforming rates, large down payments, etc), so I am always curious if anyone actually gets the mythical "same or better rate" as conforming loans without ANY W2 income.
Rocket 1.875% 15 year, not sure of equity requirement. Didn’t have to move assets.

Chase 2.375% 30 year, equity the same as above, $1M brokerage assets and $50k cash move required.

Fees about $3000 for both. I chose Rocket because I don’t have $50k I can move right now.
Tomorrow never knows.
fortunefavored
Posts: 1424
Joined: Tue Jun 02, 2015 8:18 pm

Re: FIRE/Home Loans

Post by fortunefavored »

Average Investor wrote: Tue Aug 03, 2021 8:08 pm
fortunefavored wrote: Tue Aug 03, 2021 7:48 pm
Average Investor wrote: Tue Aug 03, 2021 7:12 pm I currently have an asset-based refi in process at rocket mortgage. Chase bank also offered to lend based on assets only.
how much equity and what interest rate? I keep following these threads to dead-ends (3 to 4% ABOVE conforming rates, large down payments, etc), so I am always curious if anyone actually gets the mythical "same or better rate" as conforming loans without ANY W2 income.
Rocket 1.875% 15 year, not sure of equity requirement. Didn’t have to move assets.

Chase 2.375% 30 year, equity the same as above, $1M brokerage assets and $50k cash move required.

Fees about $3000 for both. I chose Rocket because I don’t have $50k I can move right now.
And you have zero W2 income? By equity, I mean, what percentage of your house are you refinancing? (30% of the value, 80% of the value, etc.)

Thanks for taking the time to reply.
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JupiterJones
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Location: Nashville, TN

Re: FIRE/Home Loans

Post by JupiterJones »

aristotelian wrote: Sun Aug 01, 2021 10:02 am My approach is that if I am FIRE (or close) I don't need to borrow money.
My thoughts as well. If you have to borrow money, are you really "FI"?
"Stay on target! Stay on target!"
Average Investor
Posts: 378
Joined: Fri Jul 13, 2012 11:27 am

Re: FIRE/Home Loans

Post by Average Investor »

fortunefavored wrote: Wed Aug 04, 2021 7:50 am
Average Investor wrote: Tue Aug 03, 2021 8:08 pm
fortunefavored wrote: Tue Aug 03, 2021 7:48 pm
Average Investor wrote: Tue Aug 03, 2021 7:12 pm I currently have an asset-based refi in process at rocket mortgage. Chase bank also offered to lend based on assets only.
how much equity and what interest rate? I keep following these threads to dead-ends (3 to 4% ABOVE conforming rates, large down payments, etc), so I am always curious if anyone actually gets the mythical "same or better rate" as conforming loans without ANY W2 income.
Rocket 1.875% 15 year, not sure of equity requirement. Didn’t have to move assets.

Chase 2.375% 30 year, equity the same as above, $1M brokerage assets and $50k cash move required.

Fees about $3000 for both. I chose Rocket because I don’t have $50k I can move right now.
And you have zero W2 income? By equity, I mean, what percentage of your house are you refinancing? (30% of the value, 80% of the value, etc.)

Thanks for taking the time to reply.
No W2 income. Self employed with not enough on paper to qualify for a typical income-based loan.

Home equity around 85%.

Here is some info on the Chase program: https://www.chase.com/content/dam/chase ... se-ada.pdf
Tomorrow never knows.
Topic Author
kmn99
Posts: 37
Joined: Mon Dec 03, 2018 6:09 pm

Re: FIRE/Home Loans

Post by kmn99 »

Thank you. Will check with Chase.
dboeger1
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Re: FIRE/Home Loans

Post by dboeger1 »

If you're planning on scaling up your real estate investment business to multiple units, it is possible to qualify for future mortgages with rental income, albeit at a reduced rate compared to employment income. I think that's why people generally still have a day job when they start investing in real estate, so that they can actually qualify for a mortgage, but once you have a rental, you can kind of chain that onto the next one and so on. That's why despite the general Boglehead bias against directly owning rental properties, I think it's not a bad idea to have at least 1 prior to retirement, because it at least opens up the door for declaring income. Applying for credit is the obvious common situation in which income matters, but there are some others, like marrying a foreign spouse and sponsoring their immigration, or participating in timeshare sales presentations (I know, that one's kind of random and not exactly a major missed opportunity).
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