Loans For Investors Getting The Most Out Of Your Equity!
To get the most out of your equity it is essential to establish a loan structure that will provide you with flexibility for the future. Having some usable equity in the home is the only way in which most people can take that step of buying an investment property. Establishing the right balance for your Investment Property Home Loans, will allow you to make decisions in the future about where and when you might add to your investment portfolio, wether that be in property, shares or some other form of investment.
Just what is the right way to set up your loans may differ from the next person. Within our industry there is no shortage of opinion on how to do it properly. Having said that, I am in agreement with the majority, and have listed the basic outline below;
Home Loan to access equity in the family home; A line of credit facility.
Investment Property Loan; Interest Only
I recommend that both loans be with the same bank for the first investment. Many well respected investors do not recommend this. The argument being that you need to spread your risk. Interestingly as a borrower, ie you are borowing money from the bank, you are not taking the risk, the bank is. Think about this for a moment. Lets say your bank goes into liquidation, and no other bank decides to buy their assetts. Well who will you have to repay your loan to? No one…
The real situation is though, that another bank will take over your loan contract and under the law of the land you will be given the opportunity to stay or take your business elsewhere. Alternatively, should you have funds to deposit with a bank it may be a good idea to not put all of your funds in the one place, just in case…
I advocate having your initial loans with the one lender as this will make obtaining the loans much simpler, and will take much of the stress out of the situation. Dealing with one bank is hard enough, let alone 2 at the same time. Now because we are going with the one bank, my next point is essential. Each of the 2 loans must work independent from each other, do not allow your bank to push you to cross collateralize.
Test the lender’s reputation. A lender may claim to have a good reputation, but this is something that you can easily test. You can talk to family members or friends who have refinanced their own home and see if they can give positive input about the lender you are eyeing. You can also check the Better Business Bureau or similar agencies in Atlanta for feedback on your lender.
Check the lender’s track record. How long has the lender been in business? Stability is a huge thing among lenders so you should select one who has been operating for a very long time. Unless something disastrous happens, the lenders who have been running their business for a long time are the ones who are highly likely to stay around ten or 20 years from now.
Fill out applications. Make up a list of the lenders that have passed your reputation and track record tests. Choose three or four lenders from that list whose refinancing programs you like and fill out application forms. See how fast they respond to your application and check out what they have to offer in terms of interest, repayment period, required fees and others.