Today's LIBOR Rates
1 M |
0.31563 |
 |
3 M |
0.47500 |
|
6 M |
0.68794 |
|
1 YR |
1.06438 |
|
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LIBOR Loan Case Study #168 |
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May 18, 2009
Borrower Profile:
• Wife, dentist; husband, engineer
• Monthly income: $35k
• $4.5 million custom home construction
• LIBOR loan: 18-month note based on 1-Year LIBOR
Main Benefit:
• Lower monthly payment, more favorable debt-to-income ratio
We have an engineer, a high end, A-paper client whose wife is a dentist. They bring in about $35K per month, and live in a wonderful neighborhood in an old-money suburb of San Jose. Like many other people back in the “good/bad old days,” he used a stated super jumbo construction loan to build his $4.5MM home in Saratoga CA. Like other high end communities, comparative valuations are few and far between in today's market. Nationwide, we're seeing some stagnation when it comes to moving homes above the $2MM mark. This is a combination of market inertia and credit crunch. Now back to our case study.
Our borrower went to his PMB rep (Private Mortgage Banking) to do his $3.4MM construction take out loan. They evaluated him for their 5/1 Relationship ARM, and were qualifying him in the high 6's with several points of origination and a $22K payment. He came in at a 65% debt to income ratio - and the deal was dead in the water...before he became fully LIBORATED!
There are a few great cash flow LIBOR products out there. The option we brought in for our Saratoga couple is an 18-month note based on the 1 YR LIBOR. The fully indexed rate is 1YR LIBOR (2.01%) + 1.5% = 3.51%, and a payment of $15K, bringing the DTI to 44%! We have a live deal here, folks!
The moral of the story: don't get hung up at the conventional banks. Choose a mortgage planner (or two) that has connections to investment banking and commercial lending institutions that understand the need for savvy individuals to manage their cash flow on their own time and in their own way. This is the power of LIBORATION.
Jack Williams divides his time between family and business in ever-changing proportional balance. In between changing twins' diapers, and reading Ferdinand and Good Night Moon, he is originating and facilitating funding for LIBORATED people. Jack can be contacted in care of gotrates.net.