One of the best investments that you can make is an investment in property. Investment property gives you two ways that you can profit, either from appreciation of the property or through the actual rents paid to you by the tenants. One of the most important parts of getting your property and making it profitable is finding the best mortgage for investment property. The easiest way to do this is to Get up to 5 offers, our featured loan agent. You can get started by using the box immediately below, or read more below the box about how to find the best loans for investment property.
What To Look For
There are several things that you need to look for in your investment mortgage to make sure that you’re getting the best loan for you. They are the down payment, rental cover, repayment period, and fixed or floating interest rates.
Most investment property lenders will require you to put down a down payment equal to about twenty percent of the total cost of the property. Larger down payments will reduce the total cost of your borrowing and lower your monthly payments but might also restrict the property that you can buy. Try to balance the two costs when you’re buying investment properties and figuring out how much of a loan that you can handle.
One of the most important statistics when lenders are looking at an investment mortgage is the amount of rental cover that you have built in. Rental cover is the amount of rental income divided by your mortgage payment. For the best rates you should have over 125% rental cover. This will also give you money for upkeep and other expenses. Some investment mortgage lenders will let you borrow with just 100% rental cover, but the rates will be much higher than they offer other companies.
The repayment period of the loan is also important for investment properties. Longer repayment periods will cost you more in interest, but they will also lower the monthly payments that you have to make, which will give you more money to make improvements in the property (an hopefully eventually charge more rent) or simply enjoy each month. See our investment property calculator for more information.
Fixed or Floating?
The final thing you need to consider when you’re searching out the best investment property is whether you want a fixed or floating interest rate. Floating interest rates, also called ARMs, might give you a lower rate, but when interest rates go up, you might be shocked to find your payments have increased exponentially! If you’re thinking about an ARM, make sure to pay attention to the fine print and never get one without a ceiling that places a limit on how much the interest rate can change over the course of the loan.
Now that you know the basics, you’re ready to get started looking for the best mortgage for investment property! Start your search with Mortgage Loans, where you can easily compare the different rates and terms for various different lenders. Start by filling out your information in the box below.