Chapter 14 - Frequently Asked Questions

Since you are new to mortgage investing, you may have questions in regards to what it is, what it can do for you, and if mortgage investing is really worth it in the long run. While all of your questions may not be answered, the following is a short list of the most frequently asked questions that pertain to mortgage investing, and should provide you with a good idea of what you can expect.


What is the Mortgage Investment Yield?
The standard yield is 11 14% per annum. However, it is not uncommon for some mortgages to have higher yields.


How long is a Mortgage Investment Term?
You have complete control over the term of the loan. While some loans can have a 15 year term, many have a three year term or less. Ultimately, the choice is yours.


Is a Mortgage Investment Safe?
Yes! In fact, of all the investments you can make, mortgage loans are rated as one of the safest. For this reason, home interest rates are far lower in comparison to credit card rates. Private money loans are generally based on the real estate value itself, to the degree of the individual borrowers credit.


Is a Mortgage Investment Liquid?
A mortgage investment is not as liquid as a stock or bond. That being said, it is recommended that you only invest money you will not need returned to you quickly.


How much money is required to make a Mortgage Investment?
To give you a general idea, most mortgages range from ,000 - ,000. However, you are in complete control over your investment, because you are the only one who owns your mortgage. The closing should occur at your attorneys office, or at a Title Company. Make sure you obtain title insurance and an independent property appraisal, as well as other significant documents that are required. Your check should be given directly to your attorney or the Title Company.


Is a Mortgage Investment more Trouble than its Worth?
No. With a mortgage investment you have control over when you receive your checks, which allows you to obtain your money as quickly as possible. Furthermore, if it is your wish to not be in direct contact with the borrower, simply set up your mortgage investment plan with a third party, such as a collection firm or your bank, and they will collect the payments and contact the borrower on your behalf.


What about IRAs and other Retirement Programs?
A mortgage investment is a great investment for your Pension Plan or self-directed IRA (Individual Retirement Account). The reason is because if you use your Pension Plan or IRA, your income is tax deferred and can increase faster, as you will not have to pay taxes so you will have more money for gaining interest.


Are their Precautions I should take?
First and foremost, you need to familiarize yourself with the meaning of Loan to Value (LTV). Remember, all things being equal, the greater the Loan to Value, the more risky the loan. LTV is the percentage of the loan to the property value. Therefore, a ,000 loan to a property worth 0,000 has a 70% LTV.
Most lenders are in agreement that on certain types of loans, you would require a lower Loan to Value. Loans that involve the least amount of risk are those to

? Homeowners living in their own home
? Second homes
? Rental properties
? Commercial properties
? Vacant Land

While most lenders will only lend 50% or less of the actual value of vacant land, it is also true that many lenders will not lend to corporations or trusts. Thus, it is highly recommended that if you do decide to lend to either of the above mentioned entities, you require a larger money down payment and/or a lower Loan to Value. In addition, it is highly recommended that you always insist the Borrower takes personal responsibility on the promissory note.

What Is A Deed Of Trust And Assignment Of Rent

Should this occur, the investor should ask the escrow agent to produce copies of the listed documents in the title report.

To begin with, they can make certain that their lien has been accurately recorded with the county recorders office. When everything is in the clear, and the documents have been appropriately signed, the escrow officer will inform the title company to record the trust deed, who will then deliver the loan package (all the executed loan documents) to the lender. In short, the borrower will file a petition for bankruptcy. This is a fact you wont want to forget should a tax lien appear. Foreclosure is the process that is taken by the investor in order to sell the property to a bidder from a third party, or to obtain title to the property.

_ A trust deed broker often charges investors no fees.
_ With a mortgage document foreclosure the state law will determine the foreclosure method that will take place, which can sometime involve a lengthily process. Borrowers know that when they receive a fast response from the third party in regards to their lack of payment, that the loan servicing department has zero tolerance for such behavior. The company providing escrow acts as the middle person in the transaction, and the escrow agent is the one who will process the transaction in accordance to the initial escrow instructions that were agreed on by the lender and the borrower. Remember, only through asking questions will you learn all the facts of purchasing a trust deed. At some point in your life you will retire, and like many other investors out there, you may be thinking about investing as part of your retirement plan. Conclusion By now you should have a good understanding of what is involved when it comes to trust deed investing, and should feel confident that with the knowledge you have in your possession, you can properly assess the risks involved.

Routine inspection reports of the construction site are prepared by an in-house inspector.
To make things easier, investors should keep all loan escrow documents/papers in a single folder, and to ensure the protection of the original deed of trust and note, secure these documents in a place safe from theft, fire or other potential hazards that could lead to their loss. Thus, in order for the investor to protect themselves in the event of a tax lien, a provision should be added in the trust deed and note that explains if the borrower and their property have or will receive a tax lien; it is the trustors responsibility to contact the investor. However, although a deed of trust acts like a mortgage, it is important that you understand there are differences between a mortgage and a deed of trust. Once the payment has been received in full, and the funds are cleared, the loan servicing officer will then begin to issue the appropriate checks to the investor(s) involved in the loan. Thus, from a lenders perspective, while providing a loan may seem like a sensible transaction, due to the fact that its classified as subprime, it requires private money lending. This is due to the fact that borrowers are willing to pay a higher interest rate because private investors are flexible with their loans, as they are not limited by traditional rules of bank loans.