How to Finance an Investment Property

How to Finance an Investment Property


Investing in real estate is an art. Especially when it comes to financing an investment property, there are limited options available, and all doesn’t ensure profitability. The majority of the mortgage programs you may have known are strictly restricted to borrowers only, willing to buy a primary residence.  

Throughout this article, you” ll explore some good loans for investment properties. Further, we plan to dip you in the ocean of tips that make you seize the best deal shortly. 

1. Investment Property Loans

FHA loans and VA loans are best suited to your primary residence but are not meant for an investment property. For getting considerable finances for an investment property you’re interested in, it requires you to count on conventional loans or hard money loans.

2. Conventional Loans

These are home loans that are not backed by the Government and are sold to Fannie Mae or Freddie Mac. Preferably, these are reserved for investment properties and second homes. Conventional loans need a credit score of at least 620-640 and a down payment of 5%-20% in most cases. Therefore, 30 years and 15 year fixed rate mortgage loans are the popular and profound options for investment properties. These are manageable rate mortgages such as a 5/1 ARM that are sold with a reduced initial interest rate for the initial five years of the loan.

3. Cash-out Refinance and Home Equity Loans

Your home, if it encompasses equity, you can convert that equity into collateral for a new loan. A home equity loan is the third popular investment property loan in Florida that allows you to borrow up to 80% of the market value of the home. Take into account home equity loans as receiving a second mortgage on a property. We’re not overstating that home equity loans and HELOC offer low-interest rates, much lower than many other similar kinds of loans. 

Whereas a cash-out refinance also resembles a lot to the home equity loan, except, rather than getting a second mortgage, you are refinancing the loan balance plus up to 80% LTV of the property into a new mortgage that’s asking for a single payment. However, both of these loans are considered twins in an aspect. Having one of these at your side allows you to borrow more cash at a low-interest rate to help you brilliantly fund more investment properties. 

4. Compare Refinance Rates and Offers Hard Money Loans

Explicitly defining a hard money loan, so it’s is a short term investment property loan that is quicker and more manageable to qualify as compared to traditional mortgages. In general, hard money loans are provided up to 70% of the after repaired value (APR) of a property. APR is the calculated market value of a home after all repairs are completed.

Want to know how you can qualify for a hard money loan? Let us give you possible and valuable information all at once. We are a reputed and trusted private lender/broker at A to Z Capital, and we carry a vast assortment of investment property loans throughout the Florida community. 

If you have credit issues or undocumented income, you can rely on us. Our hard money loans are great for flipping properties, but for a long-term rental, we have several different options. 

5. Portfolio Loans

A lender dedicated to portfolio loans invests in real estate mortgages and doesn’t sell them to Fannie Mae or Freddie Mac. They hang onto the mortgage loans and collect interest.

ALERT: A portfolio loan may demand higher interest rates and less desirable terms, but you can still keep this option on hold for obtaining financing for investment homes. Again, when it comes to dredging up the best financing options for your investment properties, we ask you to be extraordinarily creative. Although, there are varied options out there, from conventional loans to hard money loans, be wise and choose the one that can turn out to be lucrative for your unique investment.

Leave a Comment

Your email address will not be published.

2 + 1 =

You may also like