Amazing New Loan Product

Amazing New Loan Product by Bill Roberts

At our Windsor Capital monthly breakfast today we had a presentation by Paul Financial on their new "Equity Advantage" loan product.

Right now it is a conforming 30 year fixed with a pay-option component. It is only for well-qualified borrowers 75% LTV or less, O/O, N/O/O, full doc, NID/NIV (no ratio), purchase or cash-out re-fi.

The pay-option component works by including a $0 Heloc that grows by the amount of the payment deferred. The underlying first is fully paid and the deficiency added to the Heloc. This way the borrower gets a 1098 at the end of the year for the full interest on the mortgage even if they only paid a portion of the interest.

The monthly payment can be as much as 6% below the note rate (i.e. a 7.5% note rate could have a 1.5% pay rate) and does not recast. After approximately 60-65 months the loan payment will step up to fully amortized. Remember the underlying first trust deed and note is a fixed rate loan. The corresponding Heloc is at prime. It is when the Balance of the first + Heloc reach 85% LTV (initial appraisal) that the payment is increased to fully amortized.

This is a "perfect" product for an investor that doesn't want negative cash flow.

All we need now are higher conforming loan limits.