Mortgages for Investment Properties: What You Need to Know
Mortgages for Investment Properties
If you want to make money by investing in a rental property, there are a few things to keep in mind. As a neophyte, you may not know where to begin.
If you want to make money by investing in a rental property, there are a few things to keep in mind. As a neophyte, you may not know where to begin. This blog post will shed light on the basics of taking out a mortgage for an investment property to help you get started.
Investment Property Mortgage Basics
For starters, you should know that there are different types of mortgages for investment properties. There are investment property loans for those who want to purchase an investment property. There are also investment property refinancing loans for those who already own an investment property and want to refinance their mortgage.
Investment Property Mortgage Rates
The interest rate on an investment property mortgage is typically higher than the interest rate on a regular mortgage. This is because investment properties are considered to be a higher risk by lenders. As a result, lenders charge higher interest rates to offset the higher risk. The interest rate on an investment property mortgage can vary depending on the type of property, the location of the property, the type of loan, and the creditworthiness of the borrower.
Investment Property Mortgage Down Payment
In most cases, the down payment for this type of mortgage will be marginally higher than that of a standard mortgage. The minimum down payment on an investment property mortgage is typically 20 percent. However, some lenders may require a higher down payment. There are a few different ways to come up with the down payment for an investment property mortgage. One option is to use money from your savings account. Another option is to get a loan from a family member or friend. And finally, you could also use a home equity loan or line of credit from your primary residence. Whichever way you choose to come up with the down payment, just make sure that you have it saved up before you start the mortgage process. Otherwise, you may end up being denied the loan.
Investment Property Mortgage Loan Terms
The terms of an investment property mortgage are typically shorter. The reason for this is the same as what was mentioned above: Lenders consider investment properties to be a higher risk than standard residences. Therefore, lenders want to be able to recoup the money they lend to you as quickly as possible. Commercial investment properties can be up to 20 years but residential investment properties are typically 25 years and can go up to 40 years.
Bottom Line
Purchasing an investment property is a huge financial decision. It’s also a huge financial investment. So, is it worth it? That’s a question that only you can answer for yourself. There are a lot of things to consider before you make your final decision. However, if you’re thinking about purchasing an investment property, then you should definitely do your research. Research is essential in any financial decision. You can use the information that you find to help you make a sound decision for yourself. If all else fails, talking to a mortgage specialist will help point you in the right direction.
If you want more home-buying secrets, contact our team today. Level Up Mortgages is a mortgage broker team focused on helping the self-employed, new immigrants, non-residents, and investors access the best rate and alternative lending in Canada. We have been nominated for best up-and-coming broker in Canada in 2021 and have been on CTV News and various publications because of our education-first approach to helping you always stay a step ahead of the process. Reach out to us for access to our first-time buyer course or a mortgage strategy session.