Real Estate Pros: How your clients can buy a home with as little as 5% down & pay interest only

For business and professional use only. Not for consumer distribution. Not available in Texas

Maybe your client is just getting started on their own, have always been a renter or for whatever reason, have just not been able to save much for a down payment for their own place. Many mortgage providers want their borrowers to put 20% or even more down to qualify. In a market like California, that can be $100,000.00 or more! Sierra Lending has a solution that may be right for your clients. Our EquityFlex program can get a borrower into a home with as little as 5% down, only pay interest for the first 5 years (or 10 years), and can borrow up to 95%* of the equity on their house at any time in the first 5 (or 10) years simply by writing a check! And, it works for investment properties, too!
*Actual % of equity depends upon creditworthiness of the borrower as well as other factors

What is EquityFlex?

Simply put, EquityFlex is much like a Home Equity Line of Credit (HELOC) with some important additional features. It is set up as a line of credit so that you can draw on it up to 95%* of the value of your home. This draw period is available for either 5 or 10 years. After the draw period, the loan reverts to a regularly amortized loan for the remaining 10-20 years. During the draw period, you have the option to only pay interest, which can significantly lower your monthly expenses.

How is it different than other HELOCs?

EquityFlex is different in a number of important ways that give the borrower more flexibility than other HELOCs. We already mentioned that the borrower can choose to pay only the interest during the draw period. Another important difference is that up to 95%* of the equity in the home is available! This is because EquityFlex is set up as a 1st Lien or simply a 1st. Other HELOCs are set up as a 2nd Lien or 2nd behind a conventional mortgage and are only available for a fraction of the equity in the home, traditionally around 10%.

What other ways does EquityFlex enhance a borrower’s options?

Unlike some other HELOCs, borrowers can draw up to 95%* of their equity during the draw period as mentioned earlier. A key difference is that should a borrower find they have positive cashflow for any period of time, they can accelerate paying down the loan balance and reduce their interest payments. But here’s the real kicker: should they need that cash again later, they can draw up to 95%* of the home’s value at any time during the draw period! For example, let’s say a borrower starts with a $500,000 loan on a house worth $527,000. For the first two years, the borrower has some extra cash flow and decides to pay down their loan balance so that now they only owe $450,000. Great – the borrower only has to pay interest on $450,000! The borrower now has even better cash flow since the monthly interest is on a $50,000 smaller balance. Now, let’s say a few months later, the borrower has twins and needs to remodel a bedroom, or finally wants to get around to remodeling the kitchen. No problem: the borrower can tap the equity in their house for $50,000 simply by writing themselves a check!

Are there other advantages to EquityFlex?

EquityFlex can have lower fees than many other mortgages. For example, even though you can borrow 85%*, 90%* or even up to 95%* of your home’s equity, mortgage insurance is not required. And, depending on your state and other factors, lender fees charged by banks may be lower.

What about investment property?

EquityFlex is available for investment properties as well as property that is occupied by the borrower. For investment property, the line of credit is up to 85%* of the home’s value.

What kind of Borrower can benefit from EquityFlex?

Many kinds of borrowers can benefit from EquityFlex. Some examples may be:

  • Borrowers who have positive cashflow in their monthly expenses and want to pay down their mortgage faster than a conventional 30-year mortgage would normally paydown, but want to be able to access their equity from time to time
  • Business owners whose income varies from time to time may want to pay down principal when their income is high and pay only interest when it’s a slow time in their business cycle
  • Entrepreneurs who want to pay down principal from time to time but may want to access their equity for business expansion
  • Borrowers who have positive cash flow but know that in the future they may want to remodel or pay for large expenses like college with the equity in their home.

These are just a few examples: any borrower who wants to combine the flexibility to control access to their equity together with the flexibility to pay their mortgage off sooner is a borrower who should consider EquityFlex.

Contact us directly at 213-315-4335 or to learn more!

For business and professional use only. Not for consumer distribution.

*Actual % of equity depends upon creditworthiness of the borrower as well as other factors