When it comes to setting up IPR agreements, there are several common questions that we get from our clients. We’ve put together this page to help clients find basic information as they start exploring the process. If you have other questions, reach out to our mortgage specialists so that we can help you with your individual situation.
1. What is the contract interest rate?
Payments are determined using a lease factor of the Investor Purchase Price. If the purchase price is $500,000, and the lease factor is 0.006, the payment is $3000 ($500,000 x 0.006). Interest rates do not factor into the situation.
2. What fees are due upfront?
The homeowner has to pay for the appraisal up front. Before closing, the homeowner will also have to pay for a Real Property Report (RPR) and a home inspection.
3. What is the Loan-to-Value (LTV) available for financing?
At least 10 to 15 percent equity should be present in the home. However, depending on the amount of homeowner debt that must be paid out, more equity may be necessary.
4. Are there any pre-payment penalties?
These agreements do not have penalties for pre-payment. However, if an owner wants to complete the purchase before the term comes to an end, the terms for prepaying investors need to be adjusted so that investors get their complete yield.
5. How is my interest in buying the property back secured?
After closing, a caveat becomes registered on the property so that you can buy the property for five years.
6. Do I surrender all of my equity when I sell below full market value?
Properties generally appreciate by an average of two or three percent annually. When you buy the home back at the current market value, you should pay for less than market value and get back as much as 75 percent of the equity that you lost initially. Save the appropriate down payment over the term and build up your credit so that you can buy it back and get your equity instantly.
7. If I can’t get financing at the end of the term, what happens?
You can change the closing date, assign the contract to a third party (such as a friend or relative) to complete the purchase for you), or secure a private loan for as much as 80 percent of the value of the property and confirm if the investor will provide a vendor take back mortgage for the remainder. You do need a down payment of at least 10 percent for this to work. If this doesn’t go through, the investor can evict you.
8. How long does this process take?
As long as we receive our paperwork in a timely manner, closing can take less than two weeks if the investor does not require financing, or between four and six weeks if the investor is using a bank to provide funding.
9. What documentation is necessary?
Just like any mortgage, you need to provide two pieces of valid identification. Property appraisal, a statement of your mortgage and property tax balance, and verification of income (such as pay stubs or a job letter) are all necessary.
10. What makes Amansad Financial Services the best company to facilitate this process?
We underwrite for more than 100 direct private lenders, and these lenders also help with these IPR agreements.
11. How does Amansad Financial Services receive compensation?
The investor partners purchase contracts from Amansad Financial. We do not charge the property owner anything.