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. The solution to this problem is usually to request a bank for rental property mortgage. There are various financial institutions offering invest property mortgage all you have to do is apply. Some the items you should know when requesting for investment property mortgage are as follows.
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. This process is very important to avoid having an investment property mortgage that you will struggle very much to repay it.
You should ask the bank’s credit officer how long will it take to repay the investment property mortgage if it is granted. The idea is to evaluate whether the income generated from the rental property will be sufficient to repay the mortgage within the stipulated period. 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.
It is important to know other costs that are incurred when applying for a rental property mortgage. The person applying for mortgage in many circumstances is required to raise a certain percentage of the value of the investment property before the bank grants the rest in the form of a loan. Hence you need to know how you will raise this money when the need arises. 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. The idea is you know what to do when unforeseeable circumstances force you not have enough money to cover for the monthly mortgage installment. This will help you avoid finding yourself in a very challenging situation.