Hi Guys
I am looking for some loan advice and appreciate any views.
Looking at buying an investment property with a view to holding for say 5 years +. Would like the flexibility of making additional loan repayments to reduce the debt as quickly as possible but also like the confort of a fixed or capped rate.
Anyone got any suggestions what sort of loan product would be suitable.
Generally loans are amortized over 30yrs but you can choose to have an amortization of say 10 or 15yrs. You’re payments will of course be higher but you will pay down the debt quicker. Or you can choose a 30yr amortization period and just send in extra money on top of you’re regular payment. Rates are lower on the 10 and 15yr loans though. You may want to have a broker do a comparison for you.
You might also consider a 5 or 7yr fixed arm, these are amortized over 30yrs but the rates are generally lower than the 10,15,30yr fixed loans. And again you can make payments on top of the regular payments. You have a lot of options.
If you plan to sell the property in a little over 5 years, why do you want to give the bank all of your money? Why not invest that money in a prudent investment that can give you a greater rate of return than you are paying for that money through your mortgage and allow you to stay liquid?
If you pay down the mortgage more quickly, you will essentially make 0% return on that money. You will only get dollar for dollar back on what you put into the property in extra payments when you sell the property. Investing extra into the mortgage will not help the property appreciate faster and will not reduce your mortgage payments unless you refinance with a lower principal balance.
If you plan to keep the investment property indefinitely and pass it on to your kids, then it might make sense to pay down the mortgage as quickly as possible.
Just my 2 cents…
30 year fixed interest only. The first 10 years are interest only and then it turns into a 20 yr amortized loan. Why pay the rate if you are getting rid of it in 5 years? Get a 5 or 7 year ARM.