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Investment property mortgages are designed to help investors interested in buying rental and similar properties with affordable rates. But not all lenders are interested in taking on the risk that comes with properties you don’t intend to live in. Research your options to find fixed or variable rates to best support your investment strategy.
If you’re taking out a mortgage for a rental property, expect to pay a higher interest rate than a property for a primary residence. How much higher depends on your property, credit history and your down payment.
Investment loans differ from conventional mortgages in a few key ways. Compare key factors of investment loans to find the best fit for your strategy:
Lenders consider mortgages for investments a riskier product than your typical conventional mortgage. Some of that risk lies with thinking that you’re more likely to walk away from a property you don’t intend to live in yourself.
Because of this risk, home loans for investment often come with stricter lending requirements, tighter borrowing limits and higher interest rates. They may also have a higher loan-to-value ratio, requiring you to save up higher down payment than required for a conventional mortgage.
Your potential lender must be confident that you can repay your investor mortgage. To maximize your chances of success, save up a save a decent down payment, prepare clear evidence of your income and check your credit report for outstanding debts and liabilities.
Know too that the property you buy may affect your approval. Some lenders are reluctant to fund purchases of risky properties, like small apartments in suburbs with iffy future marketability. You may need to approach a different lender or come up with a bigger deposit.
Choosing the right investment and strategy involves comparing your benefits against the risk. For a clear picture of what you face, talk to an investment professional to avoid any surprises down the road.
An investment property can help you leverage your assets and save for the future while bringing in extra income in the meantime. If you’re considering this strategy, arm yourself with information to find the best mortgage to maximize your investment.
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