Knowing What An Investment Property Loan Is

Real estate has for a long time been considered the safest and best investment option for individuals and businesses. This is because property prices are always on an upward trend. Rental properties, on the other hand, can generate decent rental income, and there is always a big demand for both rental residential and commercial units. In the year 2008, however, many people discovered that real estate has some disadvantages, especially if the property is financed. That is why investors nowadays spend a lot of time looking for a suitable property loan to procure an investment property. At Tundra Mortgage Brokers, you will interact with experts in the real estate financing industry. These experts will help you find the perfect loan for your investment property needs. 

What is an Investment Property Loan?

This is a type of real estate financing designed specifically for the acquisition of property that is meant to be used as an investment, and not as the borrower’s home. While there are many places where you can get a real estate loan, you need to understand that an investment property loan has certain terms and conditions that make it unique. This includes:

i) Significant Loan Amount

Investment property loans are usually huge. The loan limits usually surpass those of personal home loans. This is because most investors usually invest in multifamily units to maximize their returns. When searching for a suitable loan, therefore, you will need to compare the loan limits set by different lenders to find a lender that can offer the level of financing you require to acquire the investment property of choice. 

ii) Low Monthly Payments

The main objective of investing in rental properties is to make profit. Ideally, you should be able to count your profits every single month when rent is paid. Your profit will be the difference between your expenses and your total rental income. Expenses include mortgage payment, property management fees, utilities and taxes. The ideal loan should come with a low rate of interest that leaves you with a decent profit every single month. You may need to apply for a longer term to ensure the monthly payments are significantly lower than your monthly expenses. When you make a profit every single month, you will not need be worried about what might happen in the future. 

iii) Low Rate of Interest

Property loans are usually long-term contracts that can span even 30 years. Since the loan amounts are usually substantial, a seemingly insignificant difference in the interest rate can translate to thousands of dollars in savings or extra costs. Since you want the highest possible returns on investments, you should request quotes and do a comparison to find the most affordable investment property loan on the market. This is where your mortgage broker will be very helpful. 

Fixed Rate vs Adjustable-Rate Loans

When investing for the long term, you will need to compare fixed rate mortgages and adjustable rate mortgages. A fixed rate mortgage may look cheaper in the long term and is more convenient because of the fixed monthly payments for the entire term of the loan. However, adjustable rate mortgages usually come with interest rates that are initially much lower than fixed rate mortgages. While the interest may be increased in the future, there is also a possibility of a further reduction. If rates rise to unreasonable levels, you can always refinance. Therefore, investors need to weigh their options to ensure they choose their right type of loan for their needs. 

Benefits of Consulting a Broker

When making major decisions in life, it is always recommended you consult professionals. In real estate, you will need to consult real estate agents as well as mortgage brokers. The latter will help you find the right financier as well as the right property loan for your investment needs. Mortgage brokers can help you in the following ways:

i) Find the Cheapest Loan

Loan brokers understand the market and know all the major players in the real estate financing industry. They also know what all these firms are offering. Therefore, they can scour the market to identify lenders with the lowest rate of interest, lowest down payment requirement and the lowest processing fees. This will help save you a lot of money. While you can carry out the search on your own, you are less likely to achieve better results. 

ii) Save Time

It takes a lot of time and resources to search for and compare lenders as well as the products they offer. Since you neither have the time nor resources, it is recommended you work with a suitable mortgage broker. Experts have the time and resources needed to meet client needs, so they can save you a lot of time. 

Experienced brokers are also in a better position to negotiate better deals with lenders and can even help you fill the necessary forms when applying for the loan. Please note that there are two types of brokers; those who work for lenders and those who are independent. Ideally, you should only consult independent brokers as they are in a better position to look after your investment property financing needs. 

It is crucial you also read reviews and go through the testimonials written by the previous clients of a given broker to learn more about the quality of customer service they offer. This will give you an idea of what to expect from the broker.

Interesting Related Article: “5 Tips for Getting a Loan to Finance Your Real Estate Investments