Mortgages & Notes
In big cities throughout the US, skyscrapers downtown tend to share a common theme – most have the name of a bank on them. Have you ever wondered why? It's largely due to the fact that they issue loans from their deposits generating fees and interest revenue.
Did you know you could issue loans out of your IRA and have the fees and interest accrue inside the retirement account tax deferred or tax free? With a self-directed IRA from our retirement plan administration company in Orlando, you have the freedom and control to "become the bank" with your retirement funds.
IRAs can issue both secured and unsecured loans:
- Secured notes are backed by collateral, providing the lender increased assurance of return of the loan amount and interest. The most common form of collateral for a secured note is real estate; however, notes can also be secured by non real estate assets.
- Unsecured notes are not backed by collateral. You might consider an unsecured note for perhaps a friend or a non-disqualified relative, but it is a higher risk – and sometimes reward – than a secured note.
Loan terms, such as interest rate, origination fees, and maturity date collateral are all agreed upon by you, the IRA owner, and the borrower. These terms are included in the note and applicable security agreements and provided to NuView when you make the request to fund the note within your IRA.
Loan payments are made back to the IRA per the terms of the note. As a self-directed IRA administrator, NuView does not service loans, so as the IRA owner, you are responsible to designate the loan servicer to provide NuView with a breakdown of principal and interest if the loan is amortizing and ensure that payments are being made according to the terms of the note. It is prohibited for the IRA owner to retain any portion of the payments.
Whether the loan has reached maturity or is being paid off early, the payoff payment must be returned to the IRA. If needed, the client can generate a satisfaction of mortgage for the borrower and request NuView to sign on behalf of the IRA.
Five Easy Steps to Issue a Loan From Your IRA
- Set up your self-directed IRA with NuView.
- Identify the borrower and determine collateral (if applicable) and loan terms on the investment.
- Send an Investment Authorization Form, the note and mortgage (if applicable), along with any supporting documents to NuView.
- Read and approve the note, mortgage (if applicable) and any accompanying documents
- Based on your approval, NuView executes the documents and sends funds to escrow.
All IRA investments must be titled: NuView IRA Inc FBO (Your Name) IRA #
The note/mortgage is now held by your IRA. All payments must be made to your IRA and can be tracked by your designated loan servicer via the online account access.