Investment Mortgages

Investment mortgages are mortgages used for investment properties. They work much like a residential mortgage. The main difference, however, is that you will not be living in the property, but rather you will be renting it to tenants.

Why Invest in Real Estate?

Real estate is a sound investment in almost any circumstance. While the economy may gain or lose, people will always need somewhere to live. With real estate investment, you can earn income off of that need.

Real estate investment works particularly well when the economy is doing poorly, as more and more individuals are turning to rental homes instead of purchasing their own private residences. If you can be the owner of that rental property, you can earn a good income.

Understanding Investment Mortgages

Investment mortgages go by a couple of different names. They are regularly called buy-to-let mortgages or rental mortgages. Regardless of the name, though, the basic structure is the same.

When you apply for investment mortgages, the lender will not look at your income as a basis for granting you the mortgage. Instead, the lender will look at how much you can realistically earn each month with the property. The lender wants to know that you will be earning enough to cover the monthly payment each and every month. Often, you will need to have 120% of the monthly payment amount coming in with your rental payments. This will ensure that the lender can be paid, even if one of your tenants does not pay his monthly bill. Some lenders are allowing landlords to get investment mortgages with just 100% of the monthly value coming in with rental payments.

The other stipulation tied to investment mortgages is the requirement that you have a decent down payment on the property. You will likely need at least 10% of the value of the property as the deposit when you are ready to buy. The more you can put down as a deposit, the lower your monthly payment will be.

Repayment Structure on Investment Mortgages

You can choose either repayment or interest-only investment mortgages. If you choose the interest-only mortgage, you will need to have some way to pay back the capital on the loan with it comes due at the end of the mortgage term. Otherwise you will be forced to sell your investment to pay back the debt. Repayment investment mortgages put you in the position of becoming owner of the property at the end of the mortgage term. That choice is one you will have to make on your own, because there are benefits and drawbacks to both mortgage structures.