Financial Facts: Financing investment property #realestate

Article’s Author, Bob Kieber

…if you already own the home that will be converted into a rental, you should already have a mortgage on it. You are not required to refinance the mortgage just because you make the conversion to a rental. Consider yourself at least a 1/4 percent ahead of the mortgage curve,

If you are buying a new property as a rental, you need to know the following facts. The first fact is the mortgage rate is going to be at least a 1/4 to 1/2 percent higher than that of an owner-occupied home. This is due to the anticipated use and possible abuse.

The second thing you need to know, especially if you need to show on the mortgage application the expected rental income to qualify for the mortgage, is only 75 percent of the rental income is used as income. This is due to the fact that it is anticipated that 25 percent of the income is needed to pay for maintenance.

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