Considerations When Taking An Investment Loan

18 January 2022
 Categories: , Blog

One of the challenges real estate investors experience is being unable to raise sufficient funds to build rental properties. Investment loans are often a suitable solution since they enable the investors to achieve their dreams with a small fraction of the required funds. If you intend to apply for an investment loan, read this article for valuable insights. 

Assess The Viability Of The Proposed Development

Before taking the loan, you must examine the project's viability to ensure you can comfortably make the monthly repayments. Consult an experienced real estate development consultant to establish how much you need to invest and the annual returns on your investment. As a developer, it is normal to assume that you will make a killing from your investment since other people have succeeded. However, factors such as the prevailing market forces and financial situation, the location of the property and its features could significantly influence the profitability of your venture. For example, the area's demographics could prevent you from achieving 100% occupancy. A consultant will help manage your expectations and ensure you have accurate figures before applying for the loan. 

Compare The Various Loans

Surprisingly, most investors are usually in a hurry when applying for investment loans. In most cases, they want to commence construction work and complete the building as soon as possible. This predisposes them to take loans with a high-interest rate and unreasonable terms. You can avoid this by asking your mortgage broker to provide you with a comparative analysis of the investment loans offered by the various lenders. The assessment acts as a blueprint to help you choose a lender. Some factors to look out for include the qualification criteria, required down payment, additional application costs, penalties and interest rates. Sometimes, a lender might have a low-interest rate but strict qualification criteria. In this case, ask your broker to calculate the long terms savings you will make to establish if you will work towards meeting the eligibility criteria or go for a high-interest loan with friendlier terms. 

Negotiate And Refinance The Loan 

Most lenders will be unwilling to reduce the interest rate on your loan. However, this might not be the case when you have the representation of a mortgage broker. The professionals bring a lot of business to the banks. Therefore, they have an advantage when negotiating for a reduced interest rate. Besides, the broker can help you develop cost-saving strategies on your loan. For instance, a higher deposit reduces the principal and additional costs such as insurance. 

When taking an investment loan, examine the viability of your project, compare the various loans and negotiate the interest rates. For more information, contact a local lender, like PINK FLAMINGO HOME LOANS.