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Self Directed Non Recourse IRA Mortgage Loan in NJ? Yeah, we’ve got that.

The stock market?  Yawn.  For those who are looking to further diversify their retirement plans did you know there is a unique product which provides a mortgage loan whereby your self directed IRA money is the down payment?  Loan to value ranges between 60% and 70% which means you’d have to come up with 30% to 40% down.  The loan product is a 5 year ARM with amortizations are 20 to 25 years depending on whether the property is a 1-4 Family or Commercial (5+).  Minimum loans are $50,000 for residential and $300,000 for commercial.  One necessary feature in order to do this through an IRA is that the loan product must be non-recourse, which means, if there were to be a foreclosure the lender can only go after the property for recourse; they cannot go after you personally.  Most mortgage loans are recourse loans, however for IRA lending the loan must be non course as per IRS code 590.  These loans are underwritten based on the cash-flow of the property not on the individual who is the holder of the IRA, this mirrors a commercial loan and in contrary to a typical residential underwrite.  Title to the property is taken “for the benefit of” (fbo) by the custodian of your self directed IRA, with the benefit being your actual IRA.  Another key feature is that monies from a number of people can be combined to increase the down payment.  So, for example, let’s say you want to buy a commercial property and need $200,000 as your downpayment but you only have $100,000 in your IRA, you could partner with say two other people with say $50,000 in each of their IRA accounts.  Combined you’d have the needed $200,000; the property would be held by an LLC (or other entity with terms and ownership percentage drawn up in the operating agreement).  These can be sophisticated vehicles for investment returns BUT once you know the ins-and-outs it may be one of the best alternative investment strategies you’ve never heard of.


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