The type of mortgage that you select as a real estate investor is a key factor in determining your level of risk and the cashflow that your investment will generate.
Here are six popular types of mortgages from an investor’s perspective:
The “steady Eddie” mortgage. Low risk and predictable. But, not always the lowest rate.
Adjustable Rate (ARM)
May offer lower initial rates, but the investors assumes the interest rate risk over the life of the investment.
Lower your payment by paying interest only (no principal) for a pre-defined period. But be prepared for you rates to go up.
The “gurus” preach this approach to financing which requires no down payment. This can boost the rate of return on your investment, but be aware of the risks.
A balloon mortgage is amortized or 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.
If you have a mortgage offer that seems too good to be true – it probably is.