Pacific Horizon Frequently Asked Questions
About Pacific Horizon Financial

 

 

     WHAT IS A TRUST DEED?:
     • Trust Deeds (or a Deed of Trust) – are documents that indicate a loan against a property that are         purchased by 1 (or more) Investors. Active Investors can choose their sector or property type.

     • A “Trust Deed” or “Deed of Trust” is similar to a Mortgage in that it secures a loan made against real         property (real estate), but can be foreclosed on without permission from the courts.

     • Trust Deeds differ from Mortgages in that they provide a much quicker and simpler method of enforcing         the terms of the loan.

     • Trust Deeds can be purchased by 1 or more private (or institutional) investors and are an excellent         method of generating a reliable fixed return.

     • By participating in a Trust Deed investment, you are simply taking the place of a Bank or Institutional         Mortgage Provider.

     WHAT ARE THE BENEFITS OF A TRUST DEED TO THE INVESTOR?:
     • Secured alternative investments that offer favorable yielding interest returns and consistent, monthly cash         flow on invested capital.

     • Are of favorable risk to the Investor, due to the loans being secured by the property.

     • Offer a real estate opportunity that avoids the need to manage the property.

     • Are easy to understand as compared to many other Alternative Investment Opportunities.

     • Provides an excellent vehicle in which to diversify your portfolio.

     WHO ARE THE PARTIES OF A TRUST DEED?:
     • Lender/Beneficiary/Investor – person or organization that provides the money for a secured loan         (Trust Deed) with the expectation of timely repayment of the money plus interest.

     • Borrower/Trustor – person or organization that borrows the money and secures it with a Trust Deed.

     • Trustee – person or organization that can take the collateral/pledged real estate of the Borrower in the         event of a default by the Borrower.

     • Broker - an independent agent who arranges loans by bringing Borrowers and Lenders/Investors         together.

     WHY SHOULD I UTILIZE A TRUST DEED BROKER?:
     • They know their market and have established relationships and referral sources with prospective         Borrowers.

     • Utilizing a qualified broker allows Investors to be exempt from steep usury law penalties.

     • Brokers provide the necessary documentation to:

             
  • Provide proper disclosures to both Lender and Borrower.
        
  • Ensure that hazard and/or liability insurance is in place.
        
  • Insure that the Trust Deed has the priority represented.
        
  • Assess the quality of the Borrower.
        
  • Determine the Market Value of the property/collateral.

     LIST OF TERMS:
     Amortization - paying off of debt in regular installments over a period of time.

     Deed of Reconveyance – document that shows that a loan has been paid off.

     Equity Cushion – Trust Loan Amount + Equity 2nd Trust Deed Loan Amount divided by the Total Cost.

     Impound – An account maintained to collect payments that protect the Investor and are necessary to keep         the home, but are not part of the mortgage payment.

                       • Example: Property Tax, Hazard Insurance, and/or Private Mortgage Insurance.

     Interest Only – payments on the loan are only being applied to the interest on it and not the principal.

     Loan to Completed Value (LTCV) – Amount divided by Completed Market Value.

     Loan to Cost (LTC)– Amount divided by the Total Cost.

     Loan to Value (LTV) (or After Repair Value (ARV)) – Amount divided by the Appraised Property Value.

     Prime Rate – interest rate that banks charge to their most credit worthy customers.

     Security – cash amount that the Investor receives on the loan. It is typically comprised of the Purchase         Price of the Home + Cash Collateral for Repairs + Prepaid Interest.

 

 


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