7 Types Of Investment Property Loans
What types of investment property loans are available for real estate investors today?
There are many types of investment property mortgages available for investors. In fact, some might say there are more financing options available to investors than regular home buyers and vacation homeowners. No matter what your real estate strategy there is a loan program to fit.
Types of Investment Property Loans:
Conventional Investment Property Loans
Most banks and conventional mortgage lenders offer a pared back version of their home loans for real estate investors. These loans available for purchase and refinance can come with some of the best loan rates, but may have more conservative LTV limits, and higher asset requirements.
HELs & HELOCs
Home Equity Loans and Home Equity Lines Of Credit can be taken out on investment properties, or on primary residences, and used for investment purposes. A home equity loan is generally a fixed term loan for 20 years or less. A home equity line of credit acts more like a credit card. You only pay interest on the portion of it you are using, and it can be paid down or tapped at any time for any purpose. Many real estate investors enjoy this form of financing for rehab projects, to act as a cash buyer for new acquisitions, or to have an emergency fund to cover expenses.
Transactional funding became more mainstream in the wake of the crises of the early 2000s. Prior to this it was almost exclusively restricted to elite investors with personal connections. This provides property investors with “dough for a day” to immediately flip properties.
Hard Money Loans
‘Hard money’ loans are equity based loans which are typically used for short term financing. Approval of these loans relies more heavily on the equity in a property versus a borrower’s individual strengths. This generally means lower loan-to-values, and higher mortgage interest rates, but easier qualifying. Most mortgage brokers can introduce investors to hard money loans.
A blanket mortgage is a mortgage loan which spreads across multiple properties. This could be two or more than two hundred. Blanket mortgage loans can permit real estate investors to leverage more of their equity and benefit from streamlined bookkeeping.
Mini-perm loans are mortgages which are also designed for short term borrowing during transitional periods. For example; an investor acquiring distressed properties in need of repair may use one of these loans while they fix them up and lease them, before obtaining more attractive long term financing.
Rehab loans are specifically designed for those buying and fixing up houses. These loans may be a combination of purchase mortgage funds and repair money, or can be stand-alone second mortgages to provide additional working capital to make home improvements.