An investment mortgage is a type of mortgage used primarily for an investor who wants to buy investment property – also known as an investment property mortgage. The trouble with investment mortgages (investment property mortgages) is that the interest rate is higher than in non investment mortgage loans.
Investment mortgage rates are higher because a bank or mortgage investment corporation knows that the primary goal of those looking to mortgage investments, such as in the case of somebody looking for investment property mortgage loans, is to make money. Therefore, there is more money for the taking by any mortgage provider. Furthermore, the investment property mortgage rate is higher than otherwise, but an investment property may still be the best investment for you.
Mortgage rates for investment property are not too high, though. The banks and mortgage investment corporations know that if they charge too much money, the investors wouldn’t make enough to go through with the investment.
How do you make money with an investment mortgage? Isn’t a mortgage something you have to pay every month?
Yes!! You do have to pay it every month! But, you don’t necessarily have to pay it with your money. The worst kind of investors are the ones who pay the mortgage with their own money. Instead, you pay it with the tenant’s money. In a sound investment, the rent you collect from the tenant should be enough to cover the mortgage payment, utilities, maintenance expenses, insurance, and taxes on the property. If you find this impossible to find in your area, one of two things is the problem. Either you need to look in another real estate market, or you need to put down a bigger down payment.
Before taking out an investment mortgage, remember the three rules of thumb of real estate investing.
1 – Maximum financing first
You want to finance your investments as much as possible. The more of the other person’s money you use, the better profit you will make. It is a simple truth in investment that you can’t go far on your money alone. The more of somebody else’s money you use, the more exponential your wealth will grow.
2 – Opportunity for improvement second
You want to be sure that there is something in the property which you can improve. Often times this is physical damage to the property which you can fix. In larger units, this can be the operations of the property. There are plenty of other ways to make a property improve though. You never, ever want to rely on appreciation. Don’t hope your property goes up; make it go up.
3 – Appreciation third
Relying on appreciation is a third. If you think you can buy in an area which will go up, you should. But, this should be your last concern for your property investment. Too often, it is people’s first concern.