Nathan Colmer | Van Dyk Group
C: 609.290.4293 | O: 609.492.1511
While there are some excellent opportunities to purchase a home in the LBI real estate market, it is important to make sure you can comfortably afford the home purchase. Depending on the intended use of the home, there are some creative solutions to buying a home in the LBI real estate market and alternative financing strategies on Long Beach Island. Some of these can result in an easier process and a more affordable carrying costs for your second home or investment property.
It is important to understand that there are many options available to a qualified buyer looking for a second home in the LBI real estate market. It is best to speak with several local lenders to understand the shore real estate market and see what options work best. It is equally possible to speak with your accountant or financial planner to see what your best strategy will be. Alternative financing solutions in the LBI real estate market can save you time and money under the proper application. For more information about buying a home on Long Beach Island, CONTACT ME and I will respond right away.
There are a number of alternative strategies for financing a home in the LBI real estate market. For example:
Seller financing is a rather straightforward process by which a seller, assuming they do not have a mortgage themselves, may allow transfer of the property to the buyer for only a down payment and a monthly payment for a short period of time. This can be particularly useful for someone looking to build a new home. Since construction loans can be difficult to obtain, a seller may allow a short-term mortgage, for one or two years, so the buyer can utilize a supply of cash to build a new home. Once the new home is complete, it can be refinanced and the seller can be paid off in full. This can have many advantages as the loan will be less expensive for the buyer, and the seller will obtain more money in the long term through interest payments.
A second home on a primary residence is another effective way to obtain financing in the LBI real estate market. The primary home is paid in part of in full, it may be possible to draw on the equity in the home to use as payment for a home on Long Beach Island. While this process does further encumber the primary residence, in most cases the home on Long Beach Island will have no mortgage and the overall debt structure of the individual will be the same. This can allow for an all cash offer to be made which can additionally save money in a negotiation.
Interest only loans gained negative press during the financial downturns, however they do have an effective place in a second home market. I do not recommend using an interest only mortgage as the sole source of financing, however they can be very effective in a speculative real estate investment. If individual is purchasing a property with the intention to build a new home and sell in the short-term, and interest only loan can limit the amount of out-of-pocket financing costs and make the project more profitable.
A private mortgage, which is very similar to seller financing, is an effective tool for new construction. By borrowing money from an individual with the intention of building a new home and subsequently refinancing the new home, the overall loan process and costs should be lower.