Temple Hills, MD -- (SBWire) -- 07/13/2010 -- Over-financing your property is not so difficult in real estate business in Maryland until you have a good credit score. Some amateur real estate investors in Maryland may consider 100 percent or more equity financing of their properties with no money down. This seems working for them even with lesser cash flows. The smart investors will do away with such a practice. There are hidden risks involved in over-financing. Read on to know the disadvantages of getting finance over and above the equity value of your property in Maryland.
High interest rates: Even with good credit score, taking loan on more than 100 percent value of your home will cost you too much. High interest rates will be applicable on the extra loan that may affect your cash flows and net income.
Tax liability: Another factor that you must consider is that the interest payments on the over-equity loan may not be tax-deductible in Maryland. This will decrease your net income to a great extent which may cause severe problem in the repayment of loans later.
Huge debt consolidation: With more loans your debt will increase magnificently. In many cases it happens that people fail to change their habits even with high debts in their accounts.
They take loans to pay off the liabilities on their credit cards but do not cut down on expending more. Likewise, taking more loans but not cutting down on other expenditures may lead you to suffer from financial disasters.
Difficulty in stopping foreclosures: With over-financing you will be at a high risk of getting your property foreclosed in case of default in payments. When you owe more than you should to the lenders, selling your home will get too difficult. Moreover, by already having over-financed your house, you will not be able to refinance your property in Maryland.
Make sure that you do not overlook these risks when deciding to over-finance your property. Resort to over-financing only if you have a sound financial position and heavy cash flows.
Make sure that in long-term over-financing will not create severe problems.
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Beware of Over Financing