Having rental investment loans are even harder and more costly as compared to other types of property loans such as the owner-occupied mortgage that is available in the financial market. Rental investment loans have a higher interest rate and higher down payment aside from the very strict terms and conditions. Another requirement is that the borrower should also have a very good credit rating. These aspects mentioned above can make rental property loans tougher for borrowers.
Lately, there are mortgage lenders who have created a system that will allow them to finance 100% required funds to borrowers. However, there are conditions in this type of rental loan program as this can only be used for properties such as townhouses, condominiums, single family housing, and up to 4-unit multi-family residence.
Those who want to have a larger property like a 5-unit or multi-family residence will have a hard time looking for rental investment loans that can provide 100% financing since this is not applicable for this case. It is important to remember that a place this big would also require a larger down payment on the side of the borrower.
Benefits of 100% rental loan:
There are great benefits in store in this new rental investment loans program provided by lenders. Even financial experts advice borrowers to go for a 100% rental investment loan since they will be able to avail maximum leverage. This is because they are only required to produce the closing cost which most of the time is just about 1-2% of the total loan amount. There is another option as well in which the closing cost is already included in the loan amount. This is called seller credit.
Another advantage is using the leverage as a piece of a multi step process. The borrower can use the funds to buy a rental property and when the worth of the place increases, he can use the additional equity as capital for refinancing.
Lesser monthly payments:
A very important thing that you must do is to lower down your monthly payment for rental investment loans. There are different types of rental property loans available for you in the market, when choosing one always keep in mind the interest rate that will be added to the principal loan amount. There are some options that are proven to be helpful for borrowers like the interest only payment and the minimum payment.
The interest only payment is a loan option that allows the borrower to only pay for the interest rate of rental investment loans. The principal amount will not change; it will still be the same even for a period of time. The borrower can also gain through the increase in the value of the property that can result to the appraisal of the equity.
The minimum payment on the other hand is another option used to make lesser payments than the interest. The difference will then be added to the principal amount. This helps the borrower have a better management of his fund flows.