It's just me and my funding

#Initiator of the week Karnit and Seling Gefen# Post 3
Raise your hand who always reads the small print in long and tedious contracts for himself. I am Karnit Wesling Gefen, who makes a living from reading other people's contracts, with a humbled head I admit that very few times I have read to the end dreary contracts that I have signed myself. I have a series of excuses, but I won't put faulty ideas into your head.. read or find a professional to read for you. And no, this is not my daily advice. I am here today to say that reading is not enough. What is more important is to know in advance what we want to be written there. Especially when it comes to a financing agreement.
Entrepreneurs at the beginning or with little understanding of finance, will look for the bank that will give them as much money as possible and the lowest interest rate. It is a mistake to choose the financing deal solely on the basis of these two criteria.
Here's the story: an educated and intelligent man (yes, it can happen to everyone), came to the USA following his work at the academy and decided to invest in real estate as a side business. He turned to an American bank, and asked for a mortgage in order to purchase a single family for investment. The bank offered him a fixed and good interest rate in a 30-year contract. The man was happy. Signed the contract and purchased the property with the loan. After a good five years, the man decided to sell the property, and indeed found a buyer at an excellent price. So contact the bank with a request for early repayment of the mortgage or alternatively to allow it to transfer the mortgage to the buyer under the original loan conditions. The bank replied that there is no possibility of transfer, and that early repayment of the mortgage entails the cost of an early repayment penalty in the value of 90% of the value of the mortgage. problem.
Points that are important to pay attention to when signing a financing contract: can the mortgage be transferred in the event of the sale of the property; Can the bank unilaterally make changes to the loan agreement; Is the investor allowed to make any changes and in which cases.
Remember that unlike in Israel, in the US the banks monitor the "coverage ratio" (DCR) throughout the life of the mortgage, and in some cases can require additional collateral if, according to the bank's reports, there is doubt as to the borrower's ability to repay. If the borrower will not be able to provide the collateral, the bank may start early repayment procedures or a more severe request for liquidation.
Bottom line, take the financing issue seriously. Consult and compare and think about possible scenarios before you sign.
And that the signature will always be for the better..