Alternatives to Home Loans
In this down economy, obtaining a home loan for a first time homeowner, investor or repeat buyer may be too daunting. Or, lenders may assess your financial situation too risky to lend to because of previous bad credit. Or, perhaps you are a small business owner that does not have sufficient monthly income and lenders are afraid that you may not be able to make the payments monthly. Whatever the reason is, there are many alternatives for large purchases than taking out a traditional home loan. Here is a look at other viable options:
Life Insurance Policy – As long as you are making regular monthly payments on a life insurance policy, cash value is accumulated over time. Borrowing against the cash value of your life insurance policy is much easier than obtaining a home loan since there are little to no requirements and there is no loan qualification. Prior to borrowing money through your life insurance policy, you should determine the interest rate on the loan, the taxability of the withdrawal and the effect of the loan on your death benefits. Before borrowing from your life insurance policy, do not forget the reason that you took out the loan in the first place. Ensure that owning the property outweighs having less death benefits.
Payment Protection Insurance Claims – PPI claims are another alternative to home loans. This type of payment protection ensures that repayment on a debt is ensured even after the death of the borrower.. The amount of PPI claims are not only based on the payments but the interest incurred resulting from those payments. Determining whether you have any PPI claims is a great way to obtain the money needed for larger purchases.
Self-Directed IRA – A Self-directed IRA is a way to invest on non-traditional assets such as a home or property. Self-directed IRAs are different from traditional IRAs and Roth’s because they are broader and are most often controlled by the policyholder. Purchasing a home directly from your own self-directed IRA is against the rules of the IRS since this is considered self-dealing. However, a person who is not related to you or your business can lend you money though their self-directed IRA for profit or interest. It is common practice for property flippers to use both their own savings and borrow from someone else’s IRA to complete the sale on a particular property.
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This article has been posted by Maria, a professional blogger. Catch her @financeport