The 10 Best Resources For Homes
December 16, 2017
Things to Consider When Applying for Investment Property Mortgage
Many people plan on investing in real estate properties given they have very lucrative returns. This may involve investing in rental properties or buying and selling of homes making your profits. The major drawback many people face is raising sufficient finance for the investment properties. One way of financing investment property is through applying for a mortgage. This involves requesting a financial institution to grant you a loan that you will use to acquire the rental property. The following are guidelines for applying for rental property loan.
The first thing to consider is the investment property mortgage rates. You should research whether the investment mortgage rates are fixed or variable and whether it is simple interest or compound interest. There are numerous types of rental property mortgage rates which will affect the total sum of money that you will repay. Hence some rental property mortgages may be very expensive while others may be relatively cheap hence the need to compare different banks rates. The objective is to apply for rental property mortgage from the financial institution with the most friendly rates.
You should ask the bank’s credit officer how long will it take to repay the investment property mortgage if it is granted. This step is very important as you will get an estimate of the installment amount which you will evaluate whether the investment property income will be sufficient to cover it. Therefore you need to have an accurate estimation of the periodic income from the investment property and see if it will cover the period amount that you are supposed to pay the financial institution that loaned you the money. Many people target to have a relatively extended mortgage repayment period so that the monthly installment is low enough to be covered by the rental properties income.
Apart from paying the mortgage interest there are other fees and payments that you are supposed to make which is an essential thing to consider. For example, you are supposed to raise the down payment fee before the rental property loan can be approved. Thus you need to start saving this money to that when the bank requests you deposit it you will have reached the required amount. You should also request for breakdown of the monthly installment to know what other charges you are paying apart from interest and the principal.
You should know the criteria the financial institutions use to declare you have defaulted on payment of the investment property mortgage installments. This is very important as sometimes unavoidable circumstances may happen to make the rental property unable to raise sufficient money to cover for the monthly loan installment. This is important to know when to contact the bank if you suspect that payments will be made late.