Suppose you are in the market to purchase an investment property. In that case, you may be looking at getting an investment property loan to help cover the costs of your down payment, closing costs, and any repairs needed to get it ready to rent out.
Whether you are thinking about purchasing your first investment property or you want to be more aggressive in growing your portfolio, the right Investment Property Loan can get you started on the right foot. With an investment property mortgage, you can get low-interest rates and excellent terms on the money you need to make your real estate dreams come true. Start learning about what an investment property mortgage offers today!
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Money is great, right? Therefore, it only makes sense that you want to get extra cash in your pocket. In addition, you can use a loan to do just that if you have an investment property. What most investors do not realize, however, is that there are plenty of investment property loans that can help them with their investing plans—without taking away from their profits.
Potentially Lower Risk:
Because of how it uses, an investment property loan often has a lower risk associated with it than a primary home loan. A bank will usually consider your investment property a secondary investment. You have a primary residence you own and can use to secure a mortgage if you cannot repay an investment property loan. This lowers the risk for both sides of a potential deal: If your borrower cannot pay back his or her loan or still have somewhere to live (their primary home), and if the borrower defaults on their mortgage, the bank does not get saddled with abandoned property. Because of these perks, more investors are considering an investment property loan.
Good Return On Investment (ROI):
Real estate may be just what you need if you are looking for a way to increase your wealth but are willing to take only a little risk. With real estate, you can improve your income stream and build equity in the property that appreciates over time—but since it is not liquid (you cannot easily exchange one piece of property for another), investors tend to invest conservatively. The key is buying at a below-market value so your profit margin is not hit by changing interest rates or other variables. It is better to have an expert guide you through all aspects of investment property loans so that you will not lose a significant amount of money even if things go south.
In a conventional mortgage, you pay down your principal balance every month. In an equity-accruing loan, however, your payments locate differently. Each payment reduces part of your interest owed and part of your principal owed. The more significant portion of each payment applies to interest until a certain amount reaches — usually 20 percent or 30 percent of outstanding principal — at which point a more substantial part will apply to the principal until it comes to 100 percent.
Your monthly payment remains constant as you continue to make progress on paying off your loan. Think about it as making regular, small contributions toward reducing that outstanding balance rather than simply paying what you owe with each check.
Property Ownership As Soon As The Loan Pay Off:
After you have paid off your loan, you still own your property. This is when most homeowners stop thinking about their mortgage, but it is also when they can begin building home equity. Depending on how much money is left over after paying off your mortgage, you may have enough cash to pay for renovations or buy a new car.
- In addition, even if you do not have extra cash flow, you could still see an increase in property value over time.
- For example, if you bought a home with an investment property loan of $300,000 and sold it five years later for $315,000—that is a 5% growth rate! Not inadequate compared to savings accounts that are often less than 1%.