Florida Mortgage Loans | Condo-Hotel/Condotel Rental Income Rules

Condo Hotels or Condotels continue to grow in popularity in Florida, especially in hot tourist areas like West Palm Beach, Fort Lauderdale, Orlando, Tampa, Bonita Springs and Miami.  Because of this, it is important to keep in mind what Lenders are requiring in their lending guidelines concerning this unique property type.

One major issue that comes up with Condo Hotels is the rental pool.  Part of the allure of the property is the ability to allow the hotel to rent the room out to guests while it is not being used by the owner.

Unfortunately, Lenders require that the rental pool be voluntary.  Involuntary rental pools are to be classified as Timeshares. 

What this means is that when the owner of the Condotel unit wants to rent out their unit, they must make sure they put the unit into the rental pool... it isn't automatically rented without their say so. 

Considering issues like seasonality, major local events, and discount room rates/sales, there is no valid way to forecast the actual income that will be shared by the hotel and the room owner. 

An owner that does not want to rent their Condo Hotel room at all has that option under a voluntary rental pool.   While this might bother some hotel operations that want the room to rent, this is the only way that financing can be obtained.

The voluntary rental pool also affects the potential net income.  A buyer cannot be promised $10,000 a year return on a property if they are only going to make it available for 6 months out of the years or only on weekdays.

Realtors (listing agents) and Developers are therefore strictly prohibited from advertising rates of return, cap rates or even offering investment advice concerning Condotels.  Any potential rate of return could only be hypothetically based on an assumed usage rate that may never be reached.

Because of this, any rental income will not be counted as part of the qualification income for the Condo Hotel Loan.  To the borrower, this means that their debt to income ratios will not benefit from any potential cash flows from the property. 

Given this information, it is prudent that Realtors and Mortgage Brokers advise their clients who are interested in purchasing Condo Hotel properties that they will need to be able to qualify for this purchase on its own with all their other current debt. 

If they are unable to meet the Lenders' Debt to Income Ratios with their current debts and current primary residence, then they will likely not qualify for a Condo Hotel Loan.

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Florida Mortgage | Fixed Rate or ARM ~ the decision depends on YOU

Fixed Rate Mortgages (FRM) versus Adjustable Rate Mortgages (ARMs) is a hot topic of debate right now. There is a camp of Fixed Rate evangelists that want to force-convert all mortgagors into their fold... all-the-while the ARM holders are scared by the news of impending doom sung from the rafters by Journalists and FRM propaganda.

So now YOU want to buy a house or refinance your loan and you're getting drawn and quartered by your "trusted advisors" about whether you should get a Fixed Rate Mortgage or an Adjustable Rate Mortgage (ARM).

Different people swear by different financial philosophies... the problem is they are DIFFERENT FROM YOU. The only person that knows your financial situation is YOU. The only other person who can help you decide which loan program fits you best is your Mortgage Broker.

Your Mortgage Broker will understand the nuances of your unique financial situation and will help you decide on a loan program based on your needs and preferences TODAY as well as help you plan for the future.

The information you give to your Mortgage Broker will all filter down through his/her consultative funnel and allow them to offer you two to three loan programs to choose from as well as the features and benefits of each program for you.

There are several criteria that are weighed to make the decision. A few of them are as follows:

• Your life stage
• Your career stage
• Your income and future potential
• Your family stage
• Your stability
• Your property needs

A good way to show how the decision process works is via the table below.

	Fresh out of college Just got first great job Family recommends buying not renting Single 600sq ft - 1br - Condo Down Payment Assistance from Parents
Fixed Rate Mortgage Secure - Rate is good for 30yrs Higher Payment Building Equity Assurances beyond period of time borrower will need	Adjustable Rate Mortgage Likely won't be in small condo long New job = money is tight Interest Only option helps reduce Monthly expenses No real need to "build" Equity Low cost of property means low appreciation Really this is just a step above renting
	3 years later Promotion at work Engaged - two incomes Need more space 1000 sq - 3br - Townhouse
Fixed Rate Mortgage Secure - Rate is good for 30yrs Higher Payment Building Equity Assurances beyond period of time borrower will need	Adjustable Rate Mortgage Double Income but increase in expenses Nice but small profit on other property Further from work means cost of commute Interest Only option frees up monies to repay fiance's student loans Interest Only frees up monies to pay off credit cards
	Married Husband gets promotion New Baby Refinance for Renovation of Nursery
Fixed Rate Mortgage Secure - Rate is good for 30yrs Higher Payment Building Equity Assurances beyond period of time borrower will need	Adjustable Rate Mortgage More babies in the future Space is already tight Cash is tighter Cash out with Interest Only Exit Strategy - 2 yrs Max
	Dad now Middle Management Second child First child in private school New Dog - Need a Yard Need a 5 bedroom
Fixed Rate Mortgage Secure - Rate is good for 30yrs Longer period in Home "Family Home" Salary plus investments makes comfort 30yr Hybrid with 10yrs Interest Only	Adjustable Rate Mortgage Expenses are manageable 10 year timeline unsure (max ARM length) Interest Only nice option
	Son headed away to College Daughter in Private School Mom going back to work Refinance to renovate home office Some of Cash Out used to buy 4-plex on campus for son and friends
Fixed Rate Mortgage 10yr Interest Only expires soon Double Income Investments Up Salary plus investments makes comfort 30yr Hybrid with 10yrs Interest Only Primary Residence	Adjustable Rate Mortgage Expenses are manageable 10 year timeline unsure (max ARM length) Interest Only nice option 4-plex purchased with Cash Flow ARM... increased monthly returns Investment
	Both Kids in college / Empty Nest Mom's career is taking off Dad has promotion Buying Vacation home in South Florida Buying Investment Property as well
Fixed Rate Mortgage Secure - Rate is good for 30yrs Appreciation = good equity position Investments well stocked Not sure if/when full time move to Florida Cash out of this property to buy 2nd Home another 30yr w/10 IO? - could go either way Primary Residence	Adjustable Rate Mortgage Likely won't be in House for 10 years Wintering in South Florida is great! Many friends already full time Florida residents 4plex in 1031 for 20plex Retail Strip Center Purchased where Mom's office resides 20plex bought with OptionARM Strip Center 5/1 ARM Investments
	Retirement Full time residents in Boca Raton Living on investments Sold home Up East Enjoying grandkids' visits
Fixed Rate Mortgage Timeline unknown on Primary Using monies from sale of other home to add on to retirement funds Great Ranch House in Gated Community Ability to travel Can always refinance if need for equity HELOC in place for emergencies Another 30yr Fixed with 10yr Interest Only Primary Residence	Adjustable Rate Mortgage Investment Properties 1031 Exchanged for more Properties Large Portfolio of investment properties growing Future Cash Out Refis fund purchases Cash flow establishing further income for retirement Investments restructured into LLCs to put in trust for kids/grandkids Investments

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As you can see, the borrowers' unique needs changed throughout the different lifecycles that they experienced. From just starting out in a job to getting engaged and needing to pay down accumulated debt to having kids that eventually went off to school to retirement...

Even investing in rental properties posed a dilemma about which way to go - Fixed Rate or ARM.

The consensus wants to say that since there are so many Winner icons in the Fixed Rate column, that it is obviously the winner by majority rules. The problem with that philosophy is that in any case shown above, if the timeline varied just slightly, the ARM might have come back in favor.

If an ARM had been chosen over a Fixed Rate Mortgage then the timeline had run longer than expected then Mr and Mrs. Borrower would have had to refinance ahead of schedule. Although, this isn't the worst problem they could have - it could speed up their timetable for investing in other properties or other investment vehicles.

The truth is that it is hard to predict change. The best that can be done for these borrowers is to sit down and consult on:

• Where they are
• Where they are going
• What is their entry strategy for the property
• What is their exit strategy

The best mortgage vehicle is whichever plan that will give them some security to make sure that their personal and financial lives are not burdened - but instead enhanced by their Mortgage.

When this occurs, their mortgage actually becomes a tool for their:

• wealth accumulation
• debt elimination
• college planning
• Investment strategy
• future retirement incomes

The choice between the Fixed Rate Mortgage and the Adjustable Rate Mortgage is ultimately up to the borrower. The Mortgage Broker can only advise... but a good mortgage broker can show that there are definite advantages to both programs for all borrowers.

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Florida Mortgage | Foreign National Homebuyers - Visa Waiver Program

When applying for a Foreign National Loan in the United States, a Foreign National Borrower must provide a copy of a valid passport and Visitor Visa for the lender to verify the eligibility of the borrower.

The Visa Waiver Program is available to residents of certain countries to come to the United States and stay for a period of no longer than 90 days without obtaining a visa.  These Foreign Nationals can come for either Tourism or Business reasons... Business or Pleasure.

Currently there are twenty seven (27) countries who qualify for the Visa Waiver Program.  They are:

Andorra	Iceland	Norway
Australia	Ireland	Portugal
Austria	Italy	San Marino
Belgium	Japan	Singapore
Brunei	Liechtenstein	Slovenia
Denmark	Luxembourg	Spain
Finland	Monaco	Sweden
France	the Netherlands	Switzerland
Germany	New Zealand	United Kingdom

In order for a Foreign National that qualifies for the Visa Waiver Program to obtain a Mortgage on a Second Home or Investment Real Estate, the Foreign National Borrower will need to obtain a letter certifying their Visa Waiver Program status from the nearest US Embassy or Consulate.

Foreign Nationals using the Visa Waiver Program as opposed to obtaining a full Visitor Visa will likely have trouble qualifying for a property as a primary residence, therefore only a Second Home or Investment Property mortgage program will work for these borrowers.

For more information on the Visa Waiver Program choose one of the links below:

• Department of Homeland Security   Customs & Border Protection   website.
• Visa Waiver Program Traveler Guide

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David A. Podgursky, MBA
The Mortgage Go To Guy!!
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida

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Florida Property Tax Update - The Compromise is Near!!

After some interesting phone calls from people wanting to know more and learn my opinion about what's going on in Florida Taxes, and some people who didn't get what I was saying, here's some more breaking News from the SunSentinel.com regarding the Florida Property Tax:

House Speaker unveils new approach to property tax relief that could halve bill

This afternoon Florida House Speaker Marco Rubio R-Miami announced that there was a compromise on the table during a special joint session of the Florida House and Senate including the attendance of Governor Charlie Crist.

Mr. Rubio outlined his plan in an Op-Ed piece published in today's Orlando Sentinel Newspaper.

In it, he tells of how lawmakers are taking a different approach to property tax reduction that will offer large exemptions - but not wipe out property tax altogether.

In recent weeks, many people have signed a petition hoping for a total eradication of property taxes... something the House Democrats favored but is wholly unrealistic from any perspective.

Instead, the new plan would reduce all property tax and even offer measures of reductions to business owners and renters. The method that would be used would be a percentage-based exemption system. It appears that this system would be more fair and equitable to different types of property owners - while remaining flexibile enough to remain easy to manage for tax collecting authorities.

While there is yet to be a consensus as to the formulas and the exact percentages offered per property type, House Speaker Rubio offered an example as follows:

• On the home's first $300,000 in just value, 80 percent would be exempt from property taxes.
• On the next $700,000 in just value, 70 percent would be exempt.
• On just value above $1,000,000, 30 percent would be exempt.

Essentially the exemption for a $300,000 house would be $240,000. For a $500,000 house it would be $240,000+$140,000 or $380,000. For a $1,000,000 property it would be $240,000 + $490,000 or $730,000.

This is something that would likely be seen for a Homesteaded property in the state. Businesses, Commercial Property owners, Seasonal Residents, Investors and 2nd Home owners would all have their own unique formulae.

The debate continues as House and Senate leaders now need to decide the exact percentages everyone wants to save per property type.

This plan is a variation of what House Representative David Simmons R-Maitland suggested in an earlier idea. The goal of the plan was to target the hardest hit tax payers - which are currently the homeowners with valued between $200,000 and $500,000.

The other nice effect of this plan is that there is no Sales Tax Swap... an issue much discussed in local and national media. Raising Sales Tax to accomodate lost revenue would not only cut city and state budgets to the core, but also tax lower income citizens and businesses harder than higher income citizens. It also neglects our seasonal residents and foreign nationals.

This bill would cut the overall tax-cut from $50Billion as the House originally offered to something closer to the $34Billion plan of Governor Crist - which is still much higher than the $24Billion planned cut of the Senate.

This plan may offer a choice to taxpayers benefitting under the current Save Our Homes Amendment. If the new plan would raise their taxes they may be offered the choice to stick to their old plan to save money. This will mainly affect those who bought years ago and whose property values increased the most over the past few years. With the expected rollback, to which year we don't know, this will definitely create some questions for such citizens whose property taxes will be much lower based on their long term ownership.

Also addressed was Portability... so tax payers could take a lower tax base with them when they move.

The only evident negative of this idea right now is that it may have to be issued as an amendment - which would mean it would have to wait for a November '08 vote rather than being able to claim Bill status and take effect immediately.

Local governments that have put some capital projects on hold, will be relieved if this is the case as they will still have enough budget to complete some of the most pressing projects like renovating and upgrading hospitals, firehouses and other public facilities still in disrepair from the hurricanes of 2004-2005. It will also help them afford to rebuild the beaches from this past week's mass erosion due to SubTropical storm Andrea.

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More Florida Mortgage and Real Estate News You Can Use From
David A. Podgursky, MBA
The Mortgage Go To Guy
Your Source for Residential, Commercial, Investment and Relocation Mortgages in Florida