Horses for Courses - Defining your Residential Real Estate Financing Strategy

This is a term widely used in the foreign-language translation industry, where a translator is selected for a job not solely based on his or her fluency in a language but also based on knowledge of the subject matter. Horses for courses is more of a proverb than anything else, and in financial markets that means match the financing to your purpose. For example, your real estate financing strategy, not someone else’s, and reap the benefits.


Real-Life Scenario

Many times, during business discussions with our clients about the wide array of residential real estate loan products available to them, the subject will come around to the client’s short and long-term financial goals and strategies. Half the time, clients will voice that they don’t have one. Knowing where you want to be financially in 25 or 30 years from now is a good thing, then you can implement plans and policies that will get you there.


Your Real Estate Financing Options

When you are purchasing a home or refinancing a mortgage, you have real estate pricing options that will enable you to pay a little, pay a lot, or pay nothing at all to close the transaction. Here are a wide selection of mortgage financing products to pick from:

    • Fixed-rate mortgages for 10, 15, 20, 25, 30 years
    • Adjustable-rate mortgages for 30 years fixed for periods of; 1 month, 3 months, 6 months, 12 months, 3 years, 5 years, 7 years, and 10 years
    • Interest-only mortgage financing products wherein you only pay monthly interest. This option is growing in popularity because it is an inexpensive way to service mortgage debt

Another thing to consider is that there are real estate lending programs better suited for short-term rather than long-term real estate ownership. For instance, if you were relocating to Los Angeles from New York for a three-year residency, you might consider a five-year adjustable-rate mortgage with rates close to 1% better than the standard 30-year fixed-rate product. This lower rate will produce real savings over the three-year period; on a five hundred-thousand-dollar mortgage that’s fifteen thousand in three years.  

Dave’s Tips: 

Your personal income tax circumstance, especially in light of the newly passed U.S. tax legislation, may have an impact on the type of financing you should consider.

The main lesson learned from the great recession is centered around an understanding that even if reputable bankers and regulators are willing to allow borrowers to leverage into long term mortgage debt, with no true qualification or financial planning, it’s a very bad idea. Now with the mortgage markets having fully recovered, mortgage financing has never been easier.


What is Your American Dream? 

Is it 30 years of house bounding mortgage and taxation debt? Maybe. But if your American Dream is financial independence, real estate investment can be a good choice, but so is taking your potential down payment and buying 5K of Tesla stock at $20 a share, today Tesla stock is trading at $350!

Conversely, don’t overlook the value of real estate as a long-term investment, despite being the perfect hedge to monetary inflation, real property can be a powerful source of retirement income in your golden years.

If you don’t have a real estate financing strategy, I suggest you get one, it’s never too late. 



If residential real estate investing is part of your American dream, get to know your options. We can help. Contact a friendly and professional Empire of America direct lender today.