| Conventional Mortgages for Investment Properties |
The Miller Mortgage Team has an extensive knowledge of the underwriting requirements for investment properties. We also have an extensive knowledge of state and government tax benefits and programs that can save real estate investors, speculators, and home builders thousands.
We are actually active real estate investors ourselves, and much of my knowledge of these programs comes from our research pertaining to our own investment properties.
We still have mortgage programs allowing up to 95% financing for investment properties with the best rates available in Arizona.
Types of Mortgages Often Used for Investment Properties
The type of mortgage that you select as a real estate investor is a key factor in determining your level of risk and the cash flow that your investment will generate.
Here are six popular types of mortgages from an investor’s perspective:
- Fixed Rate:
Low risk and predictable but not always the most profitable solution.
- Adjustable Rate (ARM):
May offer lower initial rates, but the investors assumes the interest rate risk over the life of the investment.
- Option ARMs, Hybrid ARMs, & Negative Amortization Loans:
The Option ARM goes by a number of aliases: pick-a-payment, deferred interest, negative amortization, NegAm, and others. There are variations on the theme, but these loans all offer flexibility, ultra-low initial payments, and generally more risk to go along with it.
The Option ARM gives the investor the option of picking between four different payment options each month.
Example: Investor enters into a $100,000 Option ARM
• Minimum payment (1%) - $322
• Interest only (7%) - $583
• 30-year amortization - $665
• 15-year amortization - $899
- Interest Only:
With an Interest Only (IO) loan you pay a lower monthly payment by paying interest only (no principal) for a pre-defined period. This is a great option for short-term investment loans and for properties that are expected to build equity quickly.
- Balloon:
A balloon mortgage is amortized over a period that is longer than the term of the loan. This can result in some savings in the monthly payment, but be prepared to re-finance at the end of the term.
