Why are Rental Property Mortgage Rates Much Higher than Residential Property Mortgage Rates?

Posted on: July 6, 2012

Categories: Buy

Author: Buy Fix and Profit (Guest)

If you are planning to buy a rental property to earn money on the side, you have to remember that although it is a proven investment, rental properties have higher mortgage rates compared to residential properties. On top of that, it is more difficult to qualify for rental property mortgage because it will require a higher down payment. There was a time where you can get a 100% financing but those days are gone now and nobody knows if they will ever return. This means that aside from the higher rental property mortgage rates, you also have to bring in more money in order to qualify.

Rental Property Why are Rental Property Mortgage Rates Much Higher than Residential Property Mortgage Rates?

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How Much Higher are Rental Property Mortgage Rates?

It is really difficult to put a finger on how much higher rental property mortgage rates are compared to residential mortgage rates because there are many different combinations and things can vary from lender to lender. But if the difference is say, 7% vs. 5%, that is indeed significant and its not impossible to reach that much. You will begin to appreciate the difference when things begin to add up. Refinance mortgage rates would be even higher. You can expect pricing adjustments if you have three to four units compared to having one to two. If you will get a condo unit, you can expect rental property mortgage rates to be higher.

Why are Rental Property Mortgage Rates Higher?

You might be wondering why there is a difference. The reason behind this is that, lenders view investors as riskier borrowers compared to homeowners. There is a good chance that you will ditch your investment if things go ugly but you are hardly going to do that with your primary residence. Homes are for keeps and homeowners would rather pay their mortgage than expose their families to homelessness. That is why lenders offer lower rates to homeowners who apply for a loan.

Because rental property mortgage rates are higher, some investors will resort to fraud to work around the problem. They would pretend to use the property as primary residence and rent it out the moment they get a financing. This is not a good idea to begin with because you are opening yourself to possible lawsuits. Putting yourself in a situation wherein you will have to face lawsuits in the future does not make any business sense.

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Is It Wise to Take Out an Interest Only Investment Loan?

Posted on: July 3, 2012

Categories: Buy, Other Articles

Author: Buy Fix and Profit (Guest)

An interest only investment loan sounds attractive to a new investor because getting this lets them buy a property while also allowing them to make lower monthly payments for the property. Monthly payments are low because this type of loan only requires that you pay for interest and let you pay for the principal a few years after the loan has started. With low monthly payments, you will have better cash flow and you can earn more profit which you can use to buy a new property or renovate an existing one. A word of caution though, if you are going to use this loan to pay monthly bills and for nonessentials, then think again, as it is not wise because of the risks that come with it.

The Risk of Interest Only Investment Loan

Interest Only Investment Loan Is It Wise to Take Out an Interest Only Investment Loan?

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As attractive as this type of loan sounds, there are numerous risks that you will be taking when you get it. Before you even consider applying for an interest only loan, you should weigh in the risk and prepare for it.

In this day and age of uncertainty, rolling the dice to decide whether to do it or not is foolish. If you do not know the figures and how to compute for interests and rates, then you may find yourself deeper in debt.

For example, you may be buying a property now for $150,000, but in just six months’ time, it may be worth only $100,000, then the lender or the bank will force you to pay some money to the loan to bring the value to positive or neutral position at the least. This is something that you have to be ready for. If you know that you won’t have enough money to cover this payment, just in case the property decreases in value, then it may be wiser to invest in a property that is cheaper at the onset, and take out a standard loan.

Should You Still Take Out an Interest Only Investment Loan?

If you are still convinced that you can make it work, then go ahead and do it. With the tax deductions that you can get, it might still be worth it. If you are very positive that the investment property that caught your attention is really going to bring you profits because of its location, and because you studied it well, then by all means take out an interest only loan. Just remember that this loan is a short-term option. You should know that healthy interest only investment loans last for 3-5 years only, and after that, you should switch to a prepayment, which already includes the principal. Better yet, you should have already sold the property at a profit so that you can pay the principal and have some extra profits to enjoy before the end of the loan.

Taking out this loan requires learning basic financial terms and computations. You should know how to do the numbers and determine if you are going to really make money. If you are unsure, enlist the help of a professional who can explain the figures to you. Interest only investment loan still works, don’t worry, you just have to ensure that this is the right financing option suitable for your need and capability.

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Is it Still Possible to Get an Investment Property Refinancing in Today’s Market?

Posted on: July 1, 2012

Categories: Buy, Other Articles

Author: Buy Fix and Profit (Guest)

Investment property refinancing may be a smart step, especially if you want to buy a new property but you do not have enough money to fund it. This move can also be made if you want to update and increase the value of your property through higher rental rates. Normally, this sounds better for investors, rather than selling the property, however, this is not a fool-proof plan, because when you are holding a rental property, there could also be some problems that will not let you have the profit that you’ve estimated.

Keeping the risks of refinancing your investment property in mind, the next thing to think about is, whether it is still possible. With all the economic up and downswings and instabilities, can you still refinance at a good rate?

Yes. It is still possible.

Getting Investment Property Refinancing in Today’s Economy

Now that we have settled the possibilities and considered the risks, you should know what kind of refinancing you could have. There are five types of refinancing: traditional, seller-carry back, seller second, subject-to and lease option. But regardless of what type of refinancing you would be getting, it’s more important to know how to get approved for the best one.

Investment Property Refinancing Is it Still Possible to Get an Investment Property Refinancing in Today’s Market?

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Honestly, it is a bit harder to get investment property refinancing these days, and getting a deal that will fit your needs and financial status requires a lot of work. You will need to shop around and talk to numerous people to see what company offers the best deal. Talk to an appraiser and not a banker to get an honest appraisal, and then get a “Good Faith Estimate” from them. Compare the costs, interest rates and fees that each appraiser gave you and decide from there.

Another way to get favorable investment property refinancing is by making sure that your property is ready. This is also sort of saying that you should maximize the appraised value of the property by enhancing some areas of the house. Clean the garden, paint the fence, fix what’s broken and straighten what’s bent, do whatever you can to enhance the curb appeal of the house so that when they appraise it, they will deem it worthy of the best rates.

Getting refinanced is difficult, especially in this economy. But as long as you are educated with interest rates, negotiations and using a mortgage broker, then nothing can go wrong. In short, preparing the property, plus doing your homework is the key to getting favorable investment property refinancing these days.

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Making Good Investment Decisions Using An Investment Property Loan Calculator

Posted on: June 29, 2012

Categories: Buy

Author: Buy Fix and Profit (Guest)

The average American takes out several loans depending on the stage of their lives. For instance, as students, they may take out an educational loan to finance their college degree or buy a car. When they’re through college, some might take out a loan to start up a new business. Later in life, they might need a mortgage loan to purchase a home for their own family. Thankfully, the internet has now various kinds of loan calculators, such as an investment property loan calculator, to help anyone perform calculations based on the individual’s need and the type of loan.

Loan calculators are very helpful tools. They help you determine the monthly payments that you can afford before taking on a loan. As a result, this can help you wisely decide on the loan to borrow without jeopardizing your finances.

Using an Investment Property Loan Calculator

Investing in property is one of the most popular ways to create wealth. However, it’s important that you plan ahead to ensure you make the most of your assets. One of the key questions in planning is, ‘Can I afford an investment property?’. To answer this question, you will need an investment property loan calculator.

Investment Property Loan Calculator Making Good Investment Decisions Using An Investment Property Loan Calculator

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An investment property loan calculator can:

  1. help you estimate how much an investment property will cost
  2. provide you an estimate of the amount of cash you will require or receive on a monthly or annual basis to fund your investment property; and
  3. give you an indication of the change in the amount of due tax you will pay to owning an investment property

When combined, these measures will give you an idea of your profit or loss associated with owning an investment property after taxes are deducted.

Investment property loan calculators vary. However, general details that you need to enter are typically the same. These include; general income and expenditure, cash operating costs, and non-cash operating costs. Under general income and expenditure, the details you have to enter includes:

  • Your annual taxable employment income
  • Interest paid on investment property on a monthly basis
  • Rent received from investment property on a monthly basis
  • Potential/projected rental growth
  • Price of investment property upon purchase

Additionally, your average operating expenses, such as accounting fees, taxes, insurances, repairs and maintenance per annum should also be entered in the computation. Obtaining funding for an investment property is no easy task especially since you have to estimate various expenses and compare them against your projected profits. But if you have a nose for a good property deal and are well versed with the use of an investment property loan calculator, you have no reason to worry.

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Compare Investment Loans Rates Before Signing Up

Posted on: June 26, 2012

Categories: Buy, Other Articles

Author: Buy Fix and Profit (Guest)

So you want to be a real estate investor? You’ve just made the best decision in your life. But before you get too excited, let me give you a few things that you have to keep in mind. Buying an investment property is a good long term investment. It’s not a get-rich-quick scheme but it has historically proven to be a good investment. Although property can drop or stagnate, it’s not as volatile compared to the stock market and it has proven to be reliable. In most cases, when you are just starting out, you would acquire property through a loan and keep in mind that investment loans rates are way different from regular residential property loan. Added to that, it is not a good idea to use your own money to finance your investments because if things go south, you will run dry.

Comparing Investment Loans Rates Compare Investment Loans Rates Before Signing Up

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What is a comparison rate?

If you want to know the true cost of a loan, you need to have a comparison rate. This will help you know the loan set-up costs, interest rates, term of the loan including any other upfront and ongoing fees tied to the loan. Knowing these and all the features of a loan will greatly help your decision in picking which one suits your needs best and which lender to pick. When we talk about comparison rates, there are a few things that you need to know that are not included and it is up to you to factor these in:

  1. Flexible repayment and Internet banking are not included.
  2. It also does not include Government charges like stamps and mortgage registration fees
  3. Comparison rate does not include fees and charges that are not available at the time it was provided.

The comparison rate will apply only to the example given. This is because different amounts will have different comparison rates especially from different lenders. Knowing this will greatly help in determining the true investment loans rates and true cost of your investment.

Since using personal money to fund your real estate investment is not a really good thing to do, you have to be thorough in getting a loan. This is the only way you can do to ensure that you will be adding eggs to your nests. If you do not take the time to know everything about investment loans rates, then you could be pouring money down the drain.

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How To Secure An Investment Property Loan More Easily

Posted on: June 19, 2012

Categories: Buy

Author: Buy Fix and Profit (Guest)

Knowing the right time to invest on a property is important for anyone planning to put their money in real estate. Some people would wonder if getting an investment property loan would be advisable during these times of economic downturn and recession.

Any property investing, especially on commercial properties during an economic crisis, is generally regarded as quite a risky thing to do as most people would be saving their money. However, savvy investors would find this is the perfect time to invest in properties as they can snap up great properties for a significantly lower price. For an investor with substantial cash reserves who do not have to worry about getting a tenant right away, it will be no problem. Below are tips to further help you make the process more easier:

Investment Property Loan How To Secure An Investment Property Loan More Easily

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1. Taking care of your credit standing

One of the first things lenders look at is credit history so the better your credit history is, the faster you’re going to get your loan. This is because lenders want to make sure that their investment is safe before they can approve your loan. If you happen to have a bad credit score but is seriously considering getting an investment property loan, you may want to work on your credit score first.

2. Taking time to do your homework

People make the common mistake of assuming that all lenders offer the same options, so they do not actually bother to check with other lenders. Truth is, different lenders offer different options with different interest rates, down payments, loan value and payment time, etc.. The bad news is you can end up putting up with a bad lender if you didn’t do enough of your homework. Once you’ve found a lender whom you’re comfortable with all their terms, you can then begin your search for the right property.

3. Be open to getting help from the experts

Some investors prefer to fly solo even without adequate knowledge on the real estate business, with some ending up with a seriously damaged property which no one wants to rent or buy. There is nothing wrong with wanting to go solo as long as you have the expertise. Be open to getting advice or help from good agents who will make sure that you get the best property that your loan can buy.

Remember, getting an investment property loan is not totally the same as getting a regular mortgage. It involves more procedures in the process. However, with the right planning and actions, your return on investment will be much rewarding than many other business ventures.

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Investment Property Rates–5 Tips to Get Started with Investing in Rental

Posted on: June 17, 2012

Categories: Buy, Other Articles

Author: Buy Fix and Profit (Guest)

If you are planning on investing in rental properties, now is the best time to do it. With the prices of homes dropping and investment property rates low, you could not ask for a better timing. With the timing really right, here are 5 tips to take advantage of this once in a lifetime opportunity:

1. Consider all your options

Always keep in mind that not all investments are the same and because of that, you have to consider all your options in relation to your strategy. Would you rather restore and re-sell properties or be a landlord? Any of these options will have its own advantages and disadvantages so you better have a good strategy that will fit them. If you are a first-time investor, it is better to start with residential housing because commercial real estate development has challenges that are not good for beginners.

Investment Property Rates Investment Property Rates  5 Tips to Get Started with Investing in Rental

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2. Find an experienced partner

Having an experienced partner is especially good if you are a first-time investor. One of the difficulties that you will meet would be locating promising properties and an experienced partner can help you a lot with that. If you don’t want to collaborate with experienced investors, you can at least talk to them about challenges that they have met and how they dealt with it.

3. Choose the best location

Avoid rural areas if you are planning to rent out but if selling is your deal, rural area is great. Also, you have to choose a place with low crime rate because nobody would be willing to stay in and pay for a place where you can get killed in the end. Remember though, properties located in the best of places will be expensive.

4. Have a good capital base

Make sure that you already have a good number of potential lenders lined up so that you have enough arsenal to face the ups and downs of investing. Even those who are in the rental business will have to pay for mortgages.

5. Be mindful of maintenance

Do not wait for your property to rot before you start repairing. Make sure that you have a good number of maintenance crews that you can call every time the situation calls for it.

If you are planning on investing in real property, now is the time to do it. Just remember that buying an investment property is much different from buying a primary residence. There are always emotions involved in buying a residential property. With investment property, you cannot be emotional about it because investment property rates can catch up on you if you will.

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Top Investment Property Advice You Shouldn’t Forget

Posted on: June 15, 2012

Categories: Buy, Property Management

Author: Buy Fix and Profit (Guest)

Getting in real estate investing may sound easy, you just have to find a property, come up with financing to buy the property and have it flipped or rented out. It’s that easy, right? Sorry to burst your bubble, but no, it is not. Investing in real estate, just like any other investments, require careful study and mastery. It is like a craft that you need to master in order to be successful in it, it’s not like you buy something one day and forget about it the next. It is after all, your investment; you bought it with big amount of money, so you also need to invest a lot of time studying it. Learning while you’re at it is the key to succeeding in this field. Like in any other business, finding investment property advice that you can follow, test and practice is essential.

Seeking Advice Top Investment Property Advice You Shouldn’t Forget

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Investment Property Advice – Before You Buy a Property

There are lots of advices that are offered around, such as tips on how to buy a property and where to get it. More than these things, you should learn what attitude you need to have and what you need to look for before you actually make an investment.

Think of it as a business. You do not decide to invest just for the sake of doing it. Because you are going to spend money, resources and time when buying a property and maintaining it, you should take it seriously. Think of it as a long-term business because real estate investing will really take time. Prepare to be patient.

Buy a property that is below the current market value. The most common mistake that new investors make is buying a property because they are speculating that it will go up in value sometime in the future. When buying, remember to check the current market value of properties in the area you are scouting, then make sure to offer an amount much lesser than that, so that whatever happens, you know that you can have a return of investment, albeit just a small amount.

Choose the best location. Best means that the place is close to schools, hospitals and transportation links. These places are appealing to tenants because of its accessibility.

Never fall in love with a property. Do not think of the property as your second home. It is an investment and that’s it. Check what tenants will like and do not choose based on your emotions.

Investment Property Advice – When Managing Your Property

After buying your first ever investment property, learning and studying continues, so here are some tips that can help you in managing your investment.

Ask a professional to be your on-call repairman. You may have a neighbor who knows how to do simple house repairs, ask him if he could do some stuff for you in case you will need it. If you want to do it yourself then that will help you save money too. In this case, you can ensure that you fix a problem fast so that the damage will not get bigger.

Ask tenants for reference. This one is very important. If you could ask them to give you their previous landlord’s contact information, then that will be best. You will know if the tenant is low maintenance or high maintenance, and if they regularly complain. It is also a good way of knowing whether they could take care of your property real well and if they pay the rent on time.

Ask for maintenance and repair deposit. As long as you properly explain the reason for asking this deposit, the tenant will not have any issues complying with it. This will ensure that the tenant will take good care of your property, or if they don’t, then you would still have money to repair whatever will be damaged.

Get professional help. For some, hiring a property manager or property management company is an expense. Yes, their services are sometimes expensive, but if you are experiencing problems like high turnover rate and damaged properties, then you might find it worth the money to hire someone to help you.

Given all these advice, you will know that owning a property for investment purposes is not a piece of cake. It requires dedication, perseverance and good public relation, not to mention, you must have the right attitude in order to succeed. There are lots of investment property tips that you can read from blogs, newspapers and books, or hear from friends who are seasoned investors, but if you don’t do them, it won’t help you at all.

Go ahead, read up and ask for investment property advice, and then make sure you apply them and test them, and soon enough, you too will be able to give out advice to new investors.

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Things You Should Know About Cash Out Refinance for Investment Property

Posted on: June 10, 2012

Categories: Buy, Other Articles

Author: Buy Fix and Profit (Guest)

Owning an investment property can mean extra income for you, however, we cannot discount the fact that it also costs money. Maintenance costs, management and the taxes you need to pay are just some of the things that you will need to spend on. When your investment property’s cash flow is not good, or you just simply want to get into a financing strategy, cash out refinance for your investment property is the way to go.

cash out refinance investment property Things You Should Know About Cash Out Refinance for Investment Property

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Cash Out Refinance for Investment Property Defined

In simple terms, cash out refinancing is a popular method to get money from the equity of the property. Usually, in this kind of process, the loan that is taken out of the equity is more than the payoff of existing loan and liens. It is normally used to pay consumer debts, and in some investor’s case, to buy other investment properties.

For example, your property has a value of $200,000 and you still owe $100,000 for it. When you want to get a lower interest rate, you can refinance the property for $150,000, in which you’d use the $100,000 to pay for the existing loan and then pocket the $50,000 for yourself.

How Others Use Cash Out Refinance for Investment Property

Commonly, people who take out this financing option use it for needs like college tuition, for emergency purposes, to pay off credit card debts or for luxury. Seasoned investors however, use the extra money to renovate the house to increase its value and for rental properties, to increase rental. These people know how to use cash out refinancing to earn more passive income through their investments, which is good, because although the ‘change’ from the cash out refinancing can be used in whatever way you choose, it is still a loan, which means it is still best if you will use it for something that will generate income for you.

Before You Take Cash Out Refinance for Investment Property

If you are someone who has been investing for quite some time now, you probably know that cashing out from your equity can be done in order to increase the value of your investment property. It also lowers the loan-to-value rate, which further increase the equity of the home. However, if you don’t know what this entails yet, then read on. When you take cash out refinancing, you go back to zero in your mortgage; you will lose the equity you have built for years and you take on more debt.

When you plan on cashing out, you should learn to push the numbers. Will it put you deeper into debt, considering the amount of interest and the number of years you need to pay for it? Remember that interest rates change every time, so it is imperative that you take this into consideration too.

Another thing to consider is the reason for getting the loan. If it’s something that is only considered a want, like a vacation in the Bahamas, then maybe it is wiser to put it off and save up for it instead. But if you think that it will rake in more profits for you in the long run, then go ahead and do it.

Taking out a loan from the equity of any property means that you are like ‘extending’ your loan. Essentially, you are getting into a longer payment plan than what you originally have. So, although it will help you in your immediate needs, it might create more problems for you in the long run. Wise investors know that when doing cash out refinance they should learn to push the numbers, calculate interest rate and make sure that the payment terms are amenable to their situation.

Cash out refinance for investment property is an amazing tool to use, when you are serious in investing. On the other hand, it can also create problems when not studied correctly and used for the wrong reasons.

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Finding the Best Investor Loan Rates

Posted on: June 5, 2012

Categories: Buy

Author: Buy Fix and Profit (Guest)

There is a great difference between getting a mortgage loan as an investor and as an ordinary homebuyer. Besides additional required documentation and stricter qualification criteria, buyers of investment properties have to put up with investor loan rates that are often higher than the interest rates for residential mortgage. Don’t worry though; as long as you can demonstrate the earning potential of your investment property, then your lender may award you a friendlier investor loan rate.

Investor Loan Rates Finding the Best Investor Loan Rates

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Here’s a comprehensive guide in obtaining an investor loan:

1. Shop around

The first thing that you should do when looking for the best investor loan rate is to shop around. Rates can differ greatly between lenders and they have different criteria for approval. To make sure that you are getting the best deal, check multiple lenders and avoid signing up to the first one you get your hands on. You have to remember also that there are lenders that are easier to work with when things go south so you also have to check their reputation.

2. Apply for the loan

After you have found the right lender to work with, now is the time to sign up for that loan. Most of the requirements don’t take long to accomplish; you need to give them personal information such as your name, your address, your employment information and Social Security number. However, also prepare the forecasted figures for your investment property as your lender will surely look into how profitable your investment would be.

3. Income verification process

This is the point wherein the lender will have to verify everything in your application. This means that they will scour your credit report and make sure you have a good score. Since this is for investment, the lender will also see to it that the projected income is sufficient to pay for the loan. Some lenders would want to see if you have enough cash reserve to pay for the loan while the property is not yet earning.

4. Down payment

In the case of investment property loans, the down payment required is usually higher than residential types. It is usually at least 25% and can go up to as high as 35% and most investors fail to consider the amount of money that they have to shell out at this point. At the shopping stage, try to find a lender that will not require you to pay a huge amount of down payment.

Shopping for a good investor loan rate is the best thing to do to find better investor loan rates. There are a host of lenders out there who are willing to give you a good deal if you only take your time to search. Make it a point to compare rates first before signing up with a lender.

pixel Finding the Best Investor Loan Rates

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