Factors Affecting Mortgage Rates for Investment Property

Posted on: May 15, 2012

Categories: Buy

Author: Buy Fix and Profit (Guest)

If you are planning to secure a loan for investment property, it is important to know that there are factors that affect mortgage rates. Knowing how these factors can affect mortgage rates for investment property will give you a better idea as to how to play your cards. Since we are talking about investment property, your profitability is of utmost consideration. If your know how to handle these factors, you can be sure that you will remain profitable. Here are the factors that affect mortgage rates for investment property:

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Photo Courtesy of Leo Reynolds via Flickr

1. Credit history

If you are in the habit of paying your mortgage and financial obligations on time, you can be sure that the loans offered to you will be of lower interest rates. Late payment on your car loan, credit card including other bills can affect your interest rates and the amount of loan that you can avail. Obviously, this will have great effect on the profitability of your investment property.

2. Time frame of the mortgages

If the type of mortgage is for a shorter period of time, it will generally have lower interest rates but you have to pay higher on the monthly basis. If your mortgage has a longer term, you will pay smaller monthly dues but, over time, these payments will amount higher than when the term ends sooner. If you don’t have the money to pay higher monthly bills, then opt for longer time frame loans but remember that you will end up paying more for this.

3. The type of mortgage

As you might have already known, there are a lot of mortgage types (conventional mortgage, VA loan, FHA loan and others) and these have different mortgage computations. Knowing the difference between the different mortgage types will give you a good view of what will offer you a better deal. Ask the advice of your banker regarding this matter.

4. The type of lender

Between different lenders, mortgage rates for investment property vary a lot and they also have different restrictions. As a rule of the thumb, conventional lenders, such as credit unions, banks and trust companies have more competitive rates compared to private lenders. Chose therefore the right type of lender for you.

Another factor affecting mortgage rates for investment property are your fixed-income investments like Treasury bonds. When the Federal Reserve purchases U.S. Treasury securities, sometimes the mortgage rates decline.

Consider these factors when shopping around for mortgage rates for investment property.

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