Investment Mortgage Loans for Aspiring Developers

Investment mortgage loans are an excellent and reliable way of providing aspiring property developers with sufficient capital in order to finance their expenditure, whether this happens to be capital expenditure (such as the purchase of property) or merely the cost of renovation of their newly acquired property.

More and More People are Getting These Loans

While the usage of investment mortgage loans was for a very long time nothing short of sluggish, due to a considerable increase in the interest of property development this has meant that more and more people are taking out these types of loans. Previously, these loans were practically the exclusive domain of a handful of professional landlords, people who had made actual careers out of the purchasing, letting, renovating and ultimately selling of property. Nowadays however the entire process has became far more democratic and so people from all walks of life are looking to get involved in this dynamic and challenging area.

Common Misconceptions

A common misconception is that there is a considerable amount of red tape and bureaucracy attached with the obtainment of investment mortgage loans, in reality there is a major degree of overlap between these loans and the more traditional forms of mortgages for residential property.

Ability to Repay

For example the overwhelming majority of financial lenders will want assurances that the borrower will be able to repay the money borrowed and do so within the time frame specified and so will have minimum income requirements which are mandatory. These requirements can be offset and minimized by relying on traditional forms of security such as collateral and co-signors although this is entirely up to the borrower. Please note that not all financial institutions impose such requirements.

Please do not be too surprised or alarmed if the financial institution from which you are attempting to borrow money from requires proof of income such as pay slips or tax returns as this is standard procedure.

Competitive Market

The investment mortgage loans market is a highly competitive one as more and more financial institutions are providing such services in an attempt to capitalize on the ever increasing demand and so you are strongly advised to make sure you compare the overall packages offered by the various institutions rather than choosing the first one you stumble across.

Potential Drawbacks

One drawback that would be property developers invariably encounter whenever they attempt to take out these particular types of loans is that there is usually the requirement that the borrower lays down a deposit before the loan will be issued. The amount of money required will depend entirely upon the lender in question, although 25% of the loan amount seems to be a popular figure among the lenders.

Make sure you give some consideration as to the different types of interest repayment schedules there are, i.e. whether you wish to opt for a fixed rate policy or a variable (also known as an adjustable rate) interest policy. In general terms, fixed rates will mean that the borrower is required to pay the same amount of interest throughout the duration of the lease, while variable means that the interest rate will vary.