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What are Real Estate Investment Loans

Aug 17, 2007
When a loan is secured by real estate collateral, it is known as a real estate loan or more commonly a mortgage. Investors prize this form of real estate because it gives them an opportunity to bring in cash. Real estate investment loans dont just come from banks and loan agencies. They can also be found via mortgage bankers, pension funds, finance lenders, and insurance companies. Investors can even secure these loans via private individuals.

The different types of real estate investment loans serve different purposes. With a residential loan, the property is only used for commercial purposes. Stores, warehouses, and commercial businesses fall into this category. Residential loans, on the other hand, can only be used for residential real estate purposes. These can also include loans used for rental income. When an investor gets this type of loan, he or she usually receives a one-time lump sum payment from the lender. This sum is paid back in installments.

Since purchasing a residential property involves having a great deal of money, a person has to undergo a thorough screening process to be approved. Many factors contribute to the lenders decision. These include the borrowers income, their credit score, and their debt/income ratio. The interest rate on the loan depends on all of these factors.

Consisting of short term loans, long term loans, and interim loans, real estate investment loans come in many varieties. There are also other options like equity financing, construction debt, permanent debt, interim financing, structured financing, mezzanine financing, foreclosure investor money, residential repair funding, and hard money loans.

Investors with less than perfect credit should not lose hope. Loans such as bad credit real estate loans are specifically formulated for individuals with tainted credit reports. Although it is a higher risk to the lender, it allows individuals to obtain a mortgage from a company when more traditional companies might decline the loan.

Interest rates are often based on how long your repayment terms last. If you have a twenty year loan, the interest rate will be higher than a five year loan. Talking frankly and openly with a loan rep will help you understand all the intricacies of the process.

Depending on the investor, many people prefer options like buying shares in a Real Estate Investment Trust (REIT). These can be used as collateral to fund investment loans.
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