(Originally published August 7, 2010.)
If necessity is the mother of invention, then Collateral Based Lending is certainly one solution for those borrowers unable to obtain mortgage financing.
In this current lending environment, many borrowers are looking to cash out of their homes, but are unable to obtain it. They’re realizing they have less equity than they thought and are possibly even “under water.” They might have credit issues that prevent them from qualifying. Or they’ve found that the “No Income Verification” mortgages they need are no longer available. (By the way, I’m still closing “No Income Check” mortgages with my lenders.)
What is a borrower in need of cash to do?
A Collateral Based Loan might be the solution. In truth, Collateral Based Lending is not a new concept; simply a product that had fallen out of vogue over the past two decades. As the name implies, Collateral Based Loans are secured solely by assets owned by the borrower. Loan amounts can range from $20,000 to $2,000,000 and the loans can be secured by:
- Publicly traded stock or bonds
- Precious metals or stones
- Fine watches or jewelry
- Exotic cars, planes, or yachts
- Art or other collectables
- In certain circumstances, funds can even be secured against the future appreciation of your home!
With Collateral Based Lending, qualifying is much easier!
- There are no credit checks required.
- Income and employment are not verified.
- Qualifying is strictly based on the value of the assets and the loan-to-value.
Interest rates are dependent on the size of the loan, the asset used to collateralize, and the loan-to-value. However, these rates are typically competitive with mortgage rates for similar sized loans.
These loans can be used for any purpose, including saving your home from foreclosure. And the closing process is measured in days, not months.
Like any other financial instrument, Asset Based Loans are not appropriate for everyone. However, for the right borrower, they can be the answer to their prayers.
If you would like more information, please contact me. We can discus your needs, analyze your financial picture, and determine the appropriate lending solution for your situation.
Since 1992, Warren Goldberg has helped thousands of clients own their homes, refinance their mortgages, restructure their debts, and invest in real estate. Warren is known for his wide knowledge of mortgage products and wealth-creation strategies.