Mortgage Programs: How Investors Use Them Wisely

I recently had a conversation with a potential new investor and he asked me “With rates being where they’re at, do you think it’s a good idea to wait to start investing?”

My response was something along the lines of…

While you’re waiting for rates to “maybe” go down sometime in the future, you are “for sure” losing out on the appreciation your property would have made during that time.  Appreciation is where you are going to be making the bulk of your wealth and I think it’s foolish to forego that gain in order to wait out interest rates.  You can always refinance down the line if/when rates do go down, but you can’t ever go back and pay less for your house.

In times like these, I also urge investors to take advantage of different loan programs that are offering lower rates.  Adjustable Rate Mortgages (ARM) can be beneficial to a buyer who is maybe planning to refinance or sell in the next 5, 7, 10 or 15 years.  These loans typically offer lower interest rates but still a fixed period at the beginning of the loan term (some up to 15-years fixed period!).  The payments are still amortized over 30-years and act like a traditional 30-year mortgage during that fixed period.

We always urge investors to think about the long-term gains and stay in the real estate market for the maximum amount of wealth building opportunity.  That does not mean that you must buy and keep the same real estate properties if there are more beneficial opportunities out there.  The average investment property is held for approximately 5-years.  Why would you invest the extra money in a higher rate to secure a fixed period you will not be using?



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