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investment property loans

Investment Property Loans:

In the olden days, investments did not really feature high on the list of priorities of an individual. People thought of investments only when the savings were lying unutilized in the bank accounts for a marginal rate of interest. However, with rapid rise in disposable income and the overall standard of living, the economic life of people too underwent a major change. Investments came up as one of the prominent financial tools and in fact became one of the ways to earn income and increase personal capital stock. As always, property investments attained the premier position and to invest in them people started relying on credit and real estate investment loans.

Basics of Investment Property Loans:

The notion that investments are made only through savings or residual income has been discarded completely. In fact, today people borrow money in order to utilize it in their investment pursuits. This is known as investment financing. Property investment financing refers to financing of real estate investments undertaken by an individual or by a firm. When, investors take a loan from a lender or a professional lending institution to purchase a property as an investment then it is called investment property loans. Investor aims to use this property to get income and increase his future earnings. With a boom in the world real estate market, property investment lending is at its all-time high.

Attributes of Investment Property Loans:

The investment property loans have several similar features to the conventional home loans. Some of the prominent attributes of property investment loans are as follows:

1) When investors apply for property investment loans, they can get a loan up to 90% of the total value of the property. However, as the loan amount exceed 80%, the investor or the borrower would also have to pay mortgage insurance charges. This insurance is solely for the protection of the lenders as they are at a high risk when they lend such a high amount.

2) Investors who already own a home or some other property can get a loan against that equity. Investors can borrow money till the limit that the equity allows.

3) One of the advantages of investment loans is that it can be taken in several ways. Investors can take the entire loan amount in full or take the loan in stages.

4) When investors take loans for property investments the loan is tax deductible.

5) Almost all the property investment loans are mainly collateral loans. Hence, the lenders have the legal authority to take charge of the property if the borrower does not repay the loan in the stipulated time.

Tips for Investment Property Loans:

Borrowing a property investment loan is a complex process. There are certain steps that would certainly help the investor in his pursuit for property investment. The important tips that would help the investors in property investment loans are as follows:

1) The first step for the borrower is to fix the amount of his deposit. The deposit is the most significant and fundamental factor that determines the precise cot of loan and the attributes of the loan that the borrower can avail. Also, the deposit is responsible for determining whether the investor can enjoy any tax benefits on the loan. The lenders charge mortgage premium on the basis of the deposit paid by the borrower.

2) It is necessary that the borrowers pay atleast 10% in the form of deposit.

3) It is important that the investor selects the perfect lender or lending institution. The ideal way is to choose a professional lending firm that specializes in property investment financing. The first thing that an investor must avoid is to contact a financer only because he is providing loans at low rates of interest. It is necessary to ensure that the lender is qualified and experienced enough and has the expertise to guide the investor regarding property investment finance. They must be able to provide the loan at the best possible interest rate that is suitable to the borrower as well as the investor. Apart from this, the lender must also provide assistance regarding precise investment diversification and the perfect loan options that the investor must choose.

Types of Investment Property Loans :

There are various types of investment property loans available for the investors to choose from. The most significant types of property investment loans are as follows:

1) Standard Variable Rate Loan: This is one of the basic types of loan and is the closest to the conventional home loans. The standard variable rate loan is mainly for those investors who wish to invest in property to secure its ownership permanently. When investors want to continue having their hold on the property forever this is the right kind of loan for them. This is the conventional type of loan, wherein the investor needs to repay the principal amount along with the fixed rate of interest.

2) Interest only Loan: These are one of the most important investment loans and have the greatest demand from the investors. This is because with the interest only loans, the investor can ensure that they get the maximum tax benefits. Apart from the tax benefits, these loans also allow lower than usual repayment amounts. As the name suggests, the investors repay only the interest of the loan during the loan tenure. At the end of the tenure, the investor pays the principal amount of loan completely.

3) Fixed rate Loan: True to the name, fixed rate loans ensure that the investors can get the loan at a fixed rate of interest determined by the market. Hence, even if the investment markets undergo fluctuations, these interest rates remain fixed and unchanged. This type of loan is ideal for those investors who would like to have fixed and low repayment amounts.

4) No-deposit Loan: The no-deposit loan is especially for those investors who have a very good and impressive credit rating. As the name suggests, no-deposit loans do not require the investors or borrowers to pay any deposit while taking a loan. However, these loans have a high rate of interest than the normal loans.

The investment property loans allow the investor to expand their capital base and asset holdings without locking their personal funds. They can repay the loan from the rental or amount of lease that the investors get. Hence, these loans allow personal growth and investments with one simple tool.