Considering Investment Property Mortgages?

by Andy Austim

The best investment property mortgages will come with low fees and a low interest rate. But getting loans with favorable terms can be difficult, especially for a real estate investor seeking their first mortgage. Knowing how to secure the best mortgage can turn a good property investment into a great one.

One of the first things you should do is choose between an adjustable rate mortgage and a fixed rate mortgage. A fixed rate mortgage stays at the same interest rate the whole period of the loan, unless it is refinanced at a later date. A fixed rate mortgage, typically lasting 15 or 30 years, is great for the investor who plans to hold the properties.

A house flipper who wants to resell the home in months rather than in years, would be more interested in adjustable rate investment property mortgages. These mortgages start out low but can increase later. If the house will sell before the rate is adjusted, this can be a way to secure a low rate on investment property mortgages.

Not only will you need money to purchase the home, you’ll probably need money to make improvements to it as well. A lot of property investors get a second mortgage on their homes to pay for improvements to their investment homes. This can be a smart way to get money, especially for house flippers, but should only be done cautiously. Will you be able to afford all of the loan repayments if you do this? Will extra debt hurt your mortgage chances?

Be sure that you can afford all of the payments before you any additional financing. While you might plan to quickly fix up the investment home, sell it for a profit, and pay off the second mortgage, you might be stuck with the home for longer than you like. Other investors who flip real estate underestimate repair and labor costs and run out of money before they finish the home.

Commercial investment property mortgages are more difficult to obtain. Since commercial property investment is deemed to be riskier venture, you’ll need proof that the income of the property is adequate to meet loan payments and operating expenses. Work with a qualified commercial lender to determine feasibility .

Securing good investment property mortgages is essential to profitable property investing. The first one may be the most difficult, but once you’ve established a successful track record, you’ll find that successive deals are easier to move forward.

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