These days it takes a lot for me to say, "What a stupid motherf*****!" in this business of training students but that's exactly what happened the other day when a student said the following:
"So...the bond people will accept 10 points (percent) that is rolled into the loan. Why do I have to pay the rest of the money back? Why won't they accept just the 10 points and that's it?"
Okay, so I understand that maybe people don't understand how 100% LTV Bond Funding works but there's a difference between F*REE GRANT MONEY and a BOND FUNDING PROGRAM. And this is NOT f*ree grant money, to be crystal clear here in case there's an ounce of confusion among you! Bond funding is no different than how a bank loan works and it needs to be paid back accordingly, as in monthly interest and principlepayments...just like any other bank loan.
You wouldn't buy a car and then tell the auto financing company..."Why do I need to pay the balance of my loan? Can't I just pay you the interest ON the loan and that's it? Why wouldn't you be happy with just that? Why do you want the rest of it?"
Try it and see if your car is still in the driveway after a few months. Chances are...the repo man will have had its way with your vehicle by then if you're that dense in how financing works.
If you were a bank that opened a mortgage on a property for $1,000,000 for somebody...would YOU be happy with receiving JUST the interest on the loan WITHOUTreceiving the principle back too?? Why would I have to even address such a stupid question to begin with...is what I simply don't understand!
It makes you wonder how some people have gotten this far in life without a lick of common sense lodged between their ears.
Let's try out this logic in real life to see how this could play out in your personal life. A friend of yours -- we'll call him Billy Bongo -- borrows $1,000 from you. He promises to pay you back in 30 days with interest of 10% (or $100). But then 30 days passes by and he shows up with only $100. You're like, "Billy Bongo -- you freaking schmuck! Where the f*** is the rest of it?" And Billy replies, "But I thought you only wanted the interest back?Why would I have to pay the rest?"
That's when you're Bongo-ing his ass out the front door so he can hit the nearest bank for the rest of the money he owes you. And if he doesn't come back with the money, you vow to find him in the nearest dark alley with your other friend, Billy Club...your prized baseball bat, to exercise a little Uncle Guido-style collection debt collection tactics.
Bond funding is no different than bank funding. Don't treat it any differently. The only real difference (which has absolutely nothing to do with you) is how they get the money. Think of it as "crowd funding" mixed with other investor raising capital methods...except all this is "behind the scenes" (don't mind the man behind the black curtain) and hasnothing to do with how you treat the money when you get it for your piece of investment real estate. You only think of it as a 100% LTV bank loan.
And yes, that includes having to pay the principle back (shocker!); in this case, it's over a 30-year amortized period of time like any other conventional bank loan. With interest. With the loan points rolled into the loan from the get-go. At a 100% LTV. These are benefits you won't get with a conventional mortgage from a traditional bank/lender.
To me, that's a pretty good deal. However, this structure won't work in areas of the country where the CAP rates are low. Like in Seattle or LA or Portland or NYC or any other area where you're looking at a single-digit CAP rate. Why? Because you can't support a 100% LTV loan on any overpriced property anywhere. The numbers just don't work!
By the way, this 100% LTV program is available all throughout the USA and for all types of properties. To download the specs on this program, go to this link: http://www.monicamain.com/100_ltv_bond
So please, stop calling my money broker and asking him lame questions. If your common-sense understanding of basic financing is that far off, go take a college course in Economics 101 first before sounding like a fool on the phone.
Remember, you're talking to money people, lenders, and other serious investment folks. When you sound mentally challenged...let's just say those bridges are quickly going up in flames, never to be used again...especially if you keep calling over and over again (try 7 times in a row) with the same stupid ass question. Over and over again. I mean...really??!! Is common sense in that short of a supply these days or were a lot of people dropped on their heads by their moms as infants?
See you at the top!