Real estate is the perfect hedge against bankruptcy and financial difficulties when stocks and other investments tumble. There are numerous benefits of owning rental property, but the primary one is an assurance of a steady income when properly handled.
It is however impossible for most would-be rental property investors to get their foot into the lucrative world of becoming a landlord without financial assistance. Investment property financing can take different forms, but a mortgage is the best choice in most situations.
The loans offered by a mortgage company in Utah for rental properties have somewhat different terms from those meant for primary residential properties. The primary step in getting the best loan terms for your rental property mortgage is to make a substantial down payment.
Although this might take some time and at times borrowing to raise, the terms you get will be worth your efforts. The following are some of the mortgage options a lender might offer for your rental investment.
These are income and asset verified home loans. You can opt for the conventional thirty-year term or a short-term adjustable rate mortgages (ARM) with balloon repayments. Conventional mortgages for rental properties generally require a 30% minimum down payment, and hence the loan-to-value ratio would be 70%.
Based on your property, credit rating and history of investment properties, the down payment required might be as high as 50%. Some lenders will not make income and asset verifications, but this will increase the rate they offer for your mortgage.
FHA 203K Loans
This is ideal for multi-family rental properties in which you will also be living in one of the units. FHA 203K mortgages can also be used for the renovation of multi-family buildings.
Before the approval of your mortgage for repairs, your contractor should submit details of the improvements, their payment schedule and the time frame of the construction. FHA 203K funds are released in batches and will help you boost your ROI on owner-occupied property.
These are available for veterans and those in active military service. Like the FHA 203K loan, this mortgage is government-backed. You can hence get rates as low as 3.5% with no down payment needed. You can only use VA loan for the purchase of an owner-occupied home.
Home Equity Lines
You can tap into your existing property’s equity to finance your new property purchase. The costs for acquiring a loan in these options are way lower than those of a conventional mortgage. With a home equity loan, you have an option of structuring your loan as a revolving line of credit.
When you sell your property, you will pay off this credit line then take it out for another property purchase. This option might however not be the best one for rental properties you do not intend to sell in the near future.
With the returns you now stand to make in the rental property market, you cannot afford to bypass an opportunity to invest in it. The mortgage options above are available to make your dream a reality. You should, however, get the loan from a reputable and supportive mortgage lender to ensure the loan does not mar your investment.