The Basics of Bridge Loans

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Bridge Loans
Image: investopedia.com/

At First Financial Tax Group, financial advisor Barry M. Kornfeld works to assist clients in the Boca Raton area with safer financial alternatives such as the purchase of first position commercial mortgage notes. An FPCM note is a short-term bridge loan that is secured by commercial real property. The safety factor lies in the fact that the property is worth considerably more than the bridge loan at time of closing. Barry Kornfeld and his team work extensively with a customer base that includes pre & post-retirement individuals who are seeking secure income-generating strategies. In fact, in today’s environment, their clients enjoy FPCM yield’s of 6% APY or better, with interest that is paid out monthly.

The term “bridge loan” refers to a loan issued over the short term, typically only 1-year at a time. Bridge loans typically cost the borrower a higher interest rate and often come with higher closing costs. It serves as a “bridge” to more permanent, long-term financing. The borrower typically uses the funds in the bridge loan as a stop-gap until he or she is able to obtain long-term credit from another source, like a traditional bank or the public markets, or even a REIT. In one example, a bridge loan might cover a situation in which an entrepreneur needs working capital until a major round of funding comes through.

Bridge loans are also called “gap loans” or “swing loans.” They are very common in the real estate sector, and they can also help a borrower to purchase or renovate an existing property or business and use the resulting new income stream to get on a better financial footing.

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First Position Commercial Mortgage Notes

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Barry Kornfeld
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Financial advisor Barry M. Kornfeld, based in Boca Raton, Florida, is co-owner of First Financial Tax Group. The firm concentrates on tax, estate and income planning for individuals of retirement and pre-retirement age. Barry Kornfeld and his team have made a particular study of the value of more conservative financial vehicles, including first position commercial mortgage notes, or FPCM’s.

An FPCM is widely considered one of the safer fixed-income alternatives when planning finances and seeking monthly income. Also called secured bridge loans, FPCM notes offer the potential to avoid the uncertainties of the markets in stocks and bonds. Additionally, an FPCM note typically earns a higher rate of interest, currently an annual percentage yield of 6 percent. The interest is paid out monthly, typically via direct deposit into the client’s bank account.

In today’s tight credit market, many potential commercial borrowers are unable to secure long term mortgage capital in an expeditious fashion. This is how an FPCM loan can help. It serves as a “bridge” over a temporary lack of capital funding sources for these borrowers. These borrowers accept the easier terms and higher interest rates of an FPCM when they need it to purchase or improve a property, then pay it back using the resulting new income streams.

Secured by a lien on specified real property, the FPCM loan is thoroughly vetted, including through a title search. As its name states, “first position” means that the holder of an FPCM is the first creditor in line for payment should a borrower default on a loan. As an additional and vital safeguard, the mortgage company that First Financial Tax Group sources its FPCM transactions through, contractually obligates itself to make the payments to lenders, even if the underlying property owner, does default. They will do this to protect their own second interest, which is subordinate to our first position, in the exact same property that we are involved in. In other words, they have skin in the same game, also, and this makes the transaction safer all around for everyone involved.

What is a Lien?

 

Lien

Lien

Barry Kornfeld is a proficient and sincere financial advisor. Also a supporter of Shriners Children’s Hospital, Barry M. Kornfeld co-owns the Boca Raton-based First Financial Tax Group with his wife of 29 years. Mr. Kornfeld focuses on assisting pre- and post-retirees with retirement & income planning, and he specializes in First Position Commercial Mortgage notes (FPCMs). FPCMs pay a 6% yield over one year and are considered a safer alternative to other financial products.

FPMCs provide clients with a first mortgage position, also known as a first lien position. This assures the owner of the FPCM the first lien position, which is the most secure and highest priority. This position differs from secondary or tertiary positions which are only repaid after the first lien position.

A publicly recorded legal interest, known as a lien, is an encumbrance on an asset or property that remains in effect until the debt is repaid. First liens must be properly developed and recorded to be secure and binding. Mr. Kornfeld and his resource partners work to ensure that all FPCM holders have properly recorded liens in the county land records where the subject property is located, so that all FPCM note holders enjoy a low maintenance and smooth experience for the duration of their holding period.

The Psychological Adjustments of Retirees

Retirement pic

Retirement
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Barry Kornfeld helps retirees plan for their financial matters through his company First Financial Tax Group. This focus correlates with Barry Kornfeld’s interest in the psychology of seniors, something on which he takes continuing professional education.

One of the most pressing concerns as people approach retirement age is financial security, so much so that people tend to equate retirement preparation with amassing wealth. However, a smaller percentage of people consider the psychological implications of retirement.

Professionals who have been working their entire adult lives may find the transition difficult for a number of reasons. For those who have come to be associated with their jobs, there is the impending loss of career identity. The workplace is also a source of one’s social life, so severing ties with people who have become part of one’s support network can prove to be a challenge. For some people, their jobs keep them active physically and intellectually, so they are presented with the challenge of looking for activities that can keep them stimulated. While some people can easily adjust to these changes, psychologists have found that other people can experience depression and anxiety.