The International Monetary Fund in their latest report, updated September 12, 2017, is very bullish about the global real estate market. The Global House Price Index continues to recover steadily from the slump of 2009-10 and has reached close to the 2008 Q1 level. House prices have gone up over the last 12 months in most countries, with Serbia and Iceland witnessing the sharpest growth. The availability of credit has also improved significantly, with the Philippines, Hong Kong, and the Slovak Republic leading this list.
Property Investment Can Give You Good Returns
Now is a good time to invest in a property. As a landlord, you can generate a steady second stream of income by renting it out. With the prices going up, and the future looking good, you can sell it off later at a premium. But you will need a large amount of money to buy the property. For most people, the only option is to take a loan.
There are many ways to finance a property purchase, and there are specific criteria too that you will have to meet before you can get that loan. Here are your options –
Property Finance Options
- Bank Loans – Home mortgage financing is the most popular method of raising capital. You have to make a down payment of 20% of the purchase price of the property, but some lenders ask for a down payment of 30%. This is a long-term loan where you have to repay the balance amount and the interest every month for many years. Lenders will analyze your income, credit history, and credit score to determine whether you qualify for the loan. The qualification criteria for mortgage loans are strict.
- Tapping the Equity of Your Home – This works best for homeowners who are planning to buy a second property as an investment. The value or equity of your home has escalated since your purchase because of rising realty prices. You can pull this equity out of your home with a reverse mortgage loan to finance your purchase. In fact, you might be able to borrow up to 80% of the current equity value of your home. You don’t have to pay back the reverse mortgage loan. It is paid back when you vacate or sell the property.
- Fix-and-Flip Loans – These are short-term loans that let you carry out renovations so you can put the property into the market and sell it. These are hard money loans offered by moneylenders. But sometimes, you can get the money from realty crowdfunding platforms too. It is easy to get these loans because the primary concern of the lender here is how much money your home can fetch and profitability and not your income, credit score and history.
Property investment is a big decision, but the payoff is good if you do it correctly. Find the best option to finance the purchase to gain from investment opportunities that can give you a great return in a few years. The real estate market is predicted to keep growing steadily.