Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: koan who wrote (96783)	4/21/2009 6:43:32 PM
From: Elroy Jetson	1 Recommendation Read Replies (1) of 116555

With real estate likely to decline more than another 20% I certainly would be reluctant to lend someone the money to buy a rental house with only 20% down. You say some banks are willing to make the loan for only five points! Wow! Most lenders want a 30% down-payment on a rental property, and many won't lend more than 50% of the value of an apartment building. The 20% equity, plus five points paid to the lender, buys the lender some protection against a 25% price decline, but it's still a very risky loan. I guess they hope if things get really bad, interest rates will decline much further and their loan will be repaid by the landlord refinancing with another lender at a lower rate. I wouldn't lend someone 80% of the value of a home they hope to rent. Not even with 5 points and a fancy interest rate. .

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