THE ULTIMATE LBI BUYER’S GUIDE

Most buyers with a mortgage on Long Beach Island will seek a second home mortgage for their purchase. This type of loan shares many similarities with a primary home mortgage however in most cases the down payment will be a minimum of 20%. The generally lower interest rates, favorable terms and down payment requirement make this type of loan very popular.

If the property is going to be used as an investment, meaning a substantial block of weeks will be rented out for income, than most likely an investment loan will be required. The terms and interest rates will vary depending on the lender and the current market but typically an investment loan will carry a slightly higher interest rate and the interest will not be tax deductible. Investment loans do have an added benefit of allowing for a 1031 tax deferred exchange.

Construction loans are the most common form of financing for new construction in the LBI real estate market. These loans are similar to the home style loans in that the bank will lend money based on the estimated costs of construction and then disperse the money in draws as the project progresses. Construction loans are commonly used with lot loans in the LBI real estate market.

With some homes having been damaged by Hurricane Sandy and being sold for land value. Luckily there are "lot loans" available that are used strictly for the purchase of vacant land in the LBI NJ real estate market. The key word here is "vacant" so there can be no building existing, damaged or undamaged, on the property.

After Hurricane Sandy, many homes in the LBI real estate market were being sold "As Is" with no repair being done on the house. Since a bank loans money on the house rather than the land, these storm damaged homes in the LBI real estate market do not qualify for traditional financing. Therefore, special loan products are required. The most popular of these is a Home-style Loan. These products are a hybrid of a conventional loan and a construction loan in that most will package the purchase price of the damaged house with the estimated cost of construction and loan 75% of this amount. Money is dispersed in draws as construction proceeds and when finished, the loan reverts to a conventional loan with no additional closing required. As is the case with all mortgages, terms and rates will vary depending on the mortgage company and the product.

There are some unconventional loan products available for houses that do not fit the traditional requirements of conventional financing. Most common are duplexes and small condominiums. Duplexes are, in most cases, automatically considered investment properties so they will carry a higher down payment and may carry a higher interest rate. Small condos (under 600 sq. feet usually) do not fit the guidelines of Fannie May and therefore require creative financing.