There are multiple reasons people would choose to invest in property. Holding investments in various portfolios is an excellent way to diversify financial risk and decrease exposure to stock market volatilities.
In most instances, an investment property project will require financing. It is essential to understand the available forms of funding and how they will attract differing investment property mortgage rates.
Read on to learn more about the different investment property mortgage options and how to make the right choice for an investment property venture.
Fixed Term Investment Property Mortgage Rates
In this form of financing for an investment property purchase, mortgage rates are fixed upfront. This provides stability and predictability for the lender in that they will know in advance the exact repayment due each month for the duration of the loan. Terms can range anywhere from six to sixty months. This is particularly useful when setting up a budget for the investment and comparing the proposed rental income to the repayments due.
Floating Investment Property Mortgage Rates
Floating interest rates are linked to the current general economic conditions and are subject to change. Lending institutions will adjust their lending rates in line with these changes. Opting for a floating investment property mortgage rate means that the interest rate you pay will fluctuate over the loan period. So when rates are lower, it is advisable to pay more than the required monthly repayment to create a buffer if the rate rises.
Interest Only Investment Property Mortgage Rates
In this form of loan, the principal amount is only repaid at the end of the loan period. Interest is repaid monthly at the agreed-upon rate, but none of the original loan amount is paid. At the end of the term, the total amount of the loan falls due. The lender can either repay the amount or refinance it and continue with another interest-only loan. So, essentially you are paying for the facility of having access to the loan amount for the stipulated period.
The current expectation is that investment property mortgage rates in New Zealand will continue to rise from their historically low rates, making the loan choice more challenging to select.
To find out which is the best investment property mortgage rates option for your next venture, get in touch with the experts at Simpler today. We deal with all the major financial lending institutions and will give you the best investment advice.