Pros and Cons of 100 Investment Loans

There are a lot of mortgage plans that allow you to make a loan even without down payment and even with investment property. Also known as 100 investment loans, they make the acquisition of investment property easier for those who cannot afford to put a large upfront investment. Although that is the case, this type of loan is a double-edged sword; it has a lot of advantages and disadvantages as well.

Important Things to Know About 100 Investment Loans

Before you decide to acquire 100 investment loans, you should know the risks involved. Not having to pay huge down payments might sound like a boon but its disadvantages can bite you if you’re not careful. In order to avoid regrets in the future, read on.

1. Accessibility

Since lenders are taking higher risks in zero down payment loans, this kind of loan may not be as accessible compared to regular loans. This is especially so if you’re a sub-prime borrower. So if you want to avail of zero down payment loans, you have to make sure that you have a good credit score.

2. Interest

Again this also has something to do with the risks the lender is taking. Since it is higher compared to regular mortgage, they tend to offset the risk by charging higher interest rates.

3. Equity

Since you finance 100% of the entire purchase price, you owe as much as the house is worth for a few years ahead. Since the value of the home and your outstanding balance remains almost equal, you will likely not have equity and owning the property will not increase your net worth.

4. Benefits

Because of the fact that you don’t need to shell out some money to own a property, zero down payment loans are making real estate easier to access. On top of that, you can also use the money intended for down payment for emergency fund or other investments.

5. Considerations

Aside from low equity and higher interest rates, zero down payment also means higher monthly payments because of higher principal balance. If you have higher monthly payments, you have to remember the fact that you have a higher risk of getting foreclosed.

100 investment loans are good if you know how to play your cards well. They are a good way to start an investment without having to produce hard cash as down payment. As long as you are careful, you can be sure to pull it through.

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