THE MORTGAGE MAZE: The Complete Guide to the Risks and Rewards of Creative Real Estate Financing by R. J. Turner

THE MORTGAGE MAZE: The Complete Guide to the Risks and Rewards of Creative Real Estate Financing

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Whatever interest rates do, the one sure bet in residential real estate is that the fixed-rate/level-payment mortgage is a thing of the past. Out of his own experience buying and selling property in the Washington, D.C. area, Turner imposes a welcome measure of order on the resultant marketplace chaos. He carefully reviews the new property financing techniques--graduated-payment, growing-equity, principal-adjustment, renegotiable-rate, rollover, and shared-appreciation mortgages--and puts the controlling market and regulatory (or deregulatory) forces into perspective. Each possibility is illustrated, moreover, with case studies that highlight the pros and cons for those on both sides of the bargaining table. Thus, in a typical LOP (lease with option to purchase) deal--usually done to circumvent a due-on-sale clause in the original mortgage--the buyer/tenant and seller/landlord have to execute a contract that specifies an installment transaction to satisfy IRS requirements; then, the former can take tax deductions for stipulated interest charges, while the latter, although able to depreciate the property, must declare such payments as ordinary income. In the meantime, Turner warns, both parties must live with title and other legal uncertainties. He also appraises institutional offerings in cautionary detail--from GPMs (watch for negative amortization which can occur when contracts with monthly payment ceilings provide unpaid interest will be added to principal) through zero-rate mortgages (a relatively expensive pre-Depression approach featuring sizable down payments whose revival may indicate that ""the desire for shelter is now greater than the desire for return on investment. . .""). Covered, too, are such ""last resorts"" as swaps, raffles, and auctions. With instructions on filling out a standard mortgage-loan application--plus an exhaustive glossary and a helpful listing of housing trade terminology: an exemplary text that will be helpful to a far wider audience than Douglas Temple's Creative Home Financing (1982), basically a buyer's handbook for all its excellence.

Pub Date: Aug. 26th, 1983
Publisher: St. Martin's