Asset Based Loan
Posted on:1/28/2006
| An asset based loan will typically be lent to a borrower, and secured by either residential or commercial real estate, or both if they are cross collatoralized, at a fixed percentage of the properties appraised value. |
Asset based lenders typically limit the loans to a 50 or 65 loan to value ratio or "LTV".
For example : If the appraisal is valued at $1,000,000.00 a lender might lend between $500,000.00 and $650,000.00.
True asset based or "Equity based" lending is easier to obtain for borrowers who do not conform to typical lending standards.
1) They may have no, little or terrible credit.
2) They may have little income to support the payments, and may need to rely on the loan itself to pay back the lender until the property is either sold, refinanced, or their income resumes.
3) They may also have little or no down payment on a large commercial purchase transaction, as would otherwise be required, because they are buying it under value.
4) They may have struck a deal with the seller to lend them the remaining balance of the purchase price, not covered by the first position mortgage.
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