If you are looking for a rental property loan, you must know the 3 most common types of loans
Knowing these common rental property loans will help you decide on the best loan that is suited to your current and future financial situation.
15 Year Mortgage
As the name suggests, this mortgage is amortized over 15 years.
This means that they take the payment and divide it by 15 years.
And that gives your payment each month.
The GOOD THING about this loan is the loan will be paid off faster.
The BAD THING is the payment is gonna be higher.
If you have a good and stable income source, you can go for 15 years mortgage and pay off the entire mortgage quickly.
While the monthly payments would be higher, you would come out of the loan as well as become the complete owner of the property sooner.
30 Year Mortgage
The next is a 30-year term loan and this loan gets amortized over 30 years.
The GOOD THING, is your cash flow is gonna be higher because you are not going to pay a lot of money every month.
But, it’s gonna take you longer to pay the loan off.
Interest Only Mortgage
The third type of loan is interest-only
So in this loan, no money goes to the actual principle of paying down the loan. Everything goes to only the interest payment.
So your cash flow is going to be through the roof.
But, then again, the mortgage balance never decreases.
Some quick tips on these loans:
So, if you have a high-paying job in a place, you might want to go with the 15-year mortgage because you are not worrying about cash flow so much.
This is the loan that is taken most frequently and the most people use.
If you’re trying to live off primarily your rental income. This might be a good option for you.
But, make sure you get a minimum of a 10-year term. Preferably, a 30-year which some banks are offering now.
Another thing, most of the big players in the real estate game, this is the option they use.