Investors can structure the mortgage in such a way to be a great investment. The human mind seems to keep on finding newer ways to make a significant profit. Here are common ways to get a mortgage for investment.
The investors pool all their money together. The investors use the pool of money to lend to the borrowers. Meanwhile, the investors earn the interest from the pool of money. This is more commonly known as mortgage-backed security.
Interest Only Mortgage
In interest only mortgage, the investors pays only the interest for the specified duration. Since the investors pay only the interest, the mortgage that the investors own stays the same. The investors patiently wait for the property to appreciate in value. When the property appreciates in value, the investors sell the property with the market price. Thereby, the investors earn a capital gain.
Buy To Let Mortgages
The investors can acquire several properties thru buy to let mortgages. With the property, the investors find tenants who want to rent. As the tenants pay rent each time, the investors uses the rent to pay off the mortgage and build home equity. When the property appreciates in value, the investors earn capital gain. If the property fails to appreciate in value, the investors can still successfully build home equity. Thereby, the investors can still earn capital gain.
Discounted Investment Mortgage
The investors can purchase an existing mortgage on a discount. Thereby, the investors earn a profit on the difference. An existing mortgage is a mortgage in which the borrower is already paying off the mortgage. For example, the total mortgage comes to $100,000. The investors purchase the mortgage for $90,000. As a result, the investors earn $10,000.
Oftentimes, the investors are looking for property at a bargain price. The investors will take a mortgage to acquire the property. If the property needs some fixing, the investors will fix up the property to drive the price higher. Finally, the investors sell the property at a higher price. This is more commonly known as flipping.
Hard Money Mortgages
The investors are private individuals who lend to borrowers with bad credit rating. Most of the times, the borrowers with bad credit rating can only be approved on a mortgage at a higher interest rate.