Investment Property Mortgage
Mortgage Investment Properties – The economy has gradually started improving from its near collapse in 2008 and 2009, and as a result, quite a few investors are thinking about using the residential real estate market as a way to make some money. The fact that residential prices remain low, as does the cost of financing, means that it is time to start moving if you have the means. An investment property mortgage can help you start making money on a residential purchase sooner, even if you don’t have the cash on hand to buy the properties outright. (Investment Property Mortgage)
Funding an Investment Property Mortgage
When it comes to securing that mortgage, though, borrowers are running into a lot of obstacles that simply weren’t there in 2008 and 2009. Getting the financing that you needed was much easier then, as lenders were trying to get as many agreements signed and dated as possible. While the real estate bubble was still inflating, and people still saw their portfolios increasing, it made sense to get the financing that you could.
Mortgage Investment Property Requirements
Investment Property Mortgage Requirements – You know what happened next, of course. Whether you were looking for a Investment Property Mortgage Loan for your own dwelling for an investment property mortgage, the rules changed — almost overnight. Income verification, which really was more of a lick and a promise before 2008, became very important to lenders. People who were self employed suddenly became a major problem, because their businesses did not yield them a check that was the same amount twice a month, once a month or once a quarter. Successful business owners, including physicians who owned their own practices, had a hard time finding financing because of these new rules. Also, credit score requirements became much more burdensome. After seeing their competition (and themselves) almost go under water because of the sheer number of bad loans that they had issued, lenders were not going to be nearly as liberal with their lending.
However, the number of people looking to invest in real estate never really went down. Because of the instability in prices, it became difficult to justify that sort of investment. After all, potential investors did not know how low housing prices were going to fall, so people with money to invest started to take their dollars elsewhere.
Investment property mortgages
Now, though, there are several reasons to invest your money by funding investment property mortgages for other borrowers. First is the reduced level of risk in comparison to other investment vehicles. If a borrower is going to purchase an investment home, it is likely that he has already squared away his own personal financial situation, as far as maintaining the payments on his own dwelling. His credit may be a little below what the bank wants, because of financial indiscretions in years past, such as falling behind on a car note or running up some high credit card debt, but people who are looking into investment properties are, by and large, more solid bets than those who are scratching and clawing just to put together that 20.1 percent down payment and praying that the bank will take them.
Investment property mortgage interest rates
Mortgage Rates Investment Properties – Another reason is that your interest rate of return will be significantly higher than if you go with investments that are completely secure, such as government backed securities or certificates of deposit. Because the mortgage is for an investment home, you can ask slightly higher interest than you would for a first home. After all, the risk is slightly higher to you than it would be for a first home — given the choice, the borrower would default on your note as opposed to the one that is guaranteed by his primary residence — and you can also ask for a shorter term. Most private loans only are set for a year or two, rather than the ten-year period that is standard for many mortgages from conventional banks in Canada.
It’s important to understand the difference between the arm’s length and the non arm’s length mortgages in Canada, though, before you start. You can put RRSP funds into either, but an arm’s length mortgage goes to someone whom you don’t know and with whom you have no connection. A non arm’s length mortgage is something you invest to help a friend or family member by that investment property, while making a profit yourself.
Amansad Financial stands ready to help connect you with potential borrowers, and we can also give you a detailed proposal based on your current financial situation. Consider adding investment property mortgage holdings to your portfolio, and give us a call!