5 Types of real estate investment loans
If you have interest in purchasing, managing, owning and renting out real estate properties, you can think of a career in real estate investing. For real estate investing, you need to take investor loan from the lenders. The type of loan will determine how much risk you are taking and what cash flow your investment will generate.
Types of investor loans
There are mainly 5 types of investor mortgage loans. These are:
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Fixed rate mortgage: In this type, the interest rate remains fixed. It involves low risk.
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Adjustable-rate mortgage: In this type, the interest rate is low at first, but, changes throughout the loan term.
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Balloon mortgage: It is a long-term, partial-amortized loan. You have low monthly payments towards the interest only and at the end of the loan term, you have to pay a lump sum amount, including the principal and the interest. Most borrowers refinance the loan before the term is over.
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Interest only mortgage: In this type, you have to pay only the interest for a specific period of time and during that time, your loan balance remains unchanged. Generally, this loan is given on home equity.
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Amortized loan: In this type you can make regular periodic weekly, bi-weekly, quarterly or monthly payments. The payment amount includes both the principal and interest.
If you can invest wisely and smartly in real estate, you may create wealth over time and you will get three returns on your investment, namely, home appreciation, return on taxes and cash flow.