Posted by HR on March 09, 2000 at 03:05:22:
You asked why get a hard money loan on one’s property when one can create paper agains the equity? A good question.
First, the home equity loan ain’t hard money. It’s rather soft money. Hard money in my area is 5 points and 18% interest. My home equity loan is no points and 10% interest. That ain’t hard. That’s lovely! My only problem with it is I don’t have enuf!
Why would one use one’s home equity? It depends on what you want to do. I use my home equity to buy, fix up, and sell property; or buy, fix up, rent up, and refi the property. Under both scenarios, I eventually pay off the home eq. I don’t want anyone else controlling my home eq since I will be paying it off. Giving my home eq as paper to someone else is probably the worst thing I could do…because of my game plan.
So you see, it still depends on your game plan. Your technique sounds like a CS buy and hold technique. It’s ok, but I think there are far better ways to utilize one’s he these days, especially given the relative ease of getting financing.
Finally, there is another reason why I don’t do the paper route. Good luck convincing the seller to take paper. I’m not saying it can’t be done. What I am saying, though, is my all cash offer will be accepted 9 times out of 10 over that hold paper technique. Why? Because I’m giving the seller what they want: cash. And I’m getting the cash, obviously, from my home eq.
Just my 2 cents.