Financing options for a property investment

Whether you are a first time buyer looking to get on the property ladder or looking for a second home mortgage there is always a finance option for you. Different circumstances and reasons for purchase decide what type of loan you can take out.

Home Loans A home loan is a loan which allows you to purchase a home and build up equity as time goes on; it is like paying money to yourself or putting it into the bank. Home loans are the most used loans in the UK as only a small number of people can afford to buy their home outright, especially first time buyers.
Your repayment rates and interest will depend upon the type of home loan you acquire and how sizeable the deposit you provide.

If you default on your payments the lender will hold the house as collateral and has the right to take the house back and resell it in order to cover the original loaned amount. This will be the very last measure though and often lenders will be happy to engage in discussion about your options. They will even discuss how they can help and support you through a rough patch in your finances and can even agree upon a new payment plan in order to get you over the hurdle you may be facing.

Investment only vs Repayment

There are many mortgage types, and people often have different opinions on what is the best to take. Traditionally, it has been thought best to try to pay off the mortgage as quickly as possible in order to reduce the monthly payments. However, it depends what your intentions are for the property overall.

A long term investor who intends to acquire a property as a home and keep the property for an extensive period of time will benefit from a repayment mortgage. If the buyer is planning to use the capital gained on the property as profit at the point of sale this is their best bet. Payments done in this way make the mortgage work as a savings plan and will leave the lender with greater equity at the point of sale.

Buyers who are looking for a regular income, i.e are renting out their home are best to go for the interest only option. This allows a better chance of seeing profit on a monthly basis. However this means that there will be less equity in the property at the point of sale and the only profit will be that value which you yourself have added to the property.

When applying for a mortgage it is always a good idea to speak things through with a financial adviser to determine what is the best option for you now and in the future.

Whether you are a first time buyer looking to get on the property ladder or looking for a second home mortgage there is always a finance option for you. Different circumstances and reasons for purchase decide what type of loan you can take out.

When applying for a mortgage it is always a good idea to speak things through with a financial adviser to determine what is the best option for you now and in the future.

This is a guest post from the team at Select Property, who specialise overseas property investment.

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Posted by: Property Blogger Categories: Finance, Property Market Tags: , 1 Comment

One Response to Financing options for a property investment

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