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Financing Your Investment Property: Mortgage Options and Strategies

Financing Your Investment Property: Mortgage Options and Strategies

Financing your investment property can be a tricky task, especially in the current lending market, with mortgages more expensive than anyone would like. 

But, with the right options and strategies, you can achieve your investment goals without spending too much of your own money right out of the gate. As a real estate investor, it's important to know your budget and make smart decisions that will benefit you in the long run. 

We’re here to discuss the different types of mortgages available for investment properties. We’ll also share some strategies to help you choose the right financing option for your needs.

Investigate Traditional Mortgages for Investment Properties 

One of the most common types of mortgages for investment properties is a traditional mortgage. This type of mortgage is offered by banks and requires a down payment of at least 20 percent. With a traditional mortgage, you can expect to have a fixed interest rate that is locked in for the life of the loan. The terms for traditional mortgages typically range from 15 to 30 years.

Prepare to demonstrate you’re a good credit risk. And, watch the mortgage rates. Higher interest rates have recently pushed mortgage costs higher. But there’s always the option to refinance into better terms when the lending landscape is more favorable to consumers. 

Leveraging Hard Money Loans

A hard money loan is another financing option that you can consider for your investment property. 

A hard money loan is secured by the property you are purchasing and is typically offered by private or non-traditional lenders. This type of loan is usually easier to qualify for, and the turnaround time for approval is much quicker than a traditional mortgage.

Be sure to check the terms and the costs of your loan before you sign off. These loans often come with fewer bureaucratic hurdles, but they can cost you more if you’re not careful. 

Adjustable-Rate Mortgages (ARMs)

An adjustable-rate mortgage is a type of mortgage that offers a lower initial interest rate that will eventually adjust based on market conditions. These mortgage types have become far more popular in recent years with rates being so high for fixed mortgages. 

With an ARM, you can expect to have a fixed interest rate for a certain period of time, typically 3-10 years. After that, the rate will adjust based on changes in the market. 

This type of mortgage can be risky but can also be beneficial if you plan on holding onto the property for a short time frame.

Strategies to Help You Choose the Right Mortgage for Your Investment

Right MortgageWhen it comes to choosing the right mortgage for your investment property, there are a few strategies that you can follow to ensure you make the best decision possible. 

  • Make sure to shop around and compare the rates and terms offered by different lenders. 

  • Consider the length of the loan and how it will fit into your investment goals.

  • Talk to professionals and get some good advice. 

  • Factor in all the additional costs associated with owning an investment property, such as property taxes and maintenance expenses.

Another strategy is to have a solid business plan in place before applying for a mortgage. This will show lenders that you have a clear strategy for making your investment profitable and will increase your chances of getting approved. 

Choosing the right mortgage is an important part of investing in real estate. With the right strategies in place, you can find a mortgage that meets your needs and fits into your overall investment plan. 

If you’d like to talk about investing in Colorado real estate, please contact us at PURE Property Management of Colorado. We’d love to provide some direction and support.