WHAT ARE THE USES FOR PROPERTY LOANS,
CONSTRUCTION LOANS & MORE

If the property search is not going well, it may be time to consider building a home from scratch. House building loans (and general construction loans) are issued under different time-frames and eligibility requirements than a commercial property mortgage. Construction loans are considered short-term loans (1 year max) while traditional mortgages are usually issued over a longer period of time. Construction loans can help cover the cost of labor, materials, and permits. There are also renovation loans available which can help cover the costs of home maintenance or any form of renovation project for an already built home.

A loan for house construction will generally charge higher interest rates, and require that you pay interest monthly for the duration of the loan. Once the house construction is completed, you will be required to pay back the loan in full.

However, there are other kinds of construction loans that can convert to a permanent mortgage once the house is built. This is known as a construction to permanent loan and is based on the projected value of the house. Once the home is built, the construction transitions into a traditional mortgage. This is a simple and cost-efficient option, as it involves only one round of closing fees, applications and paperwork.

There are numerous kinds of investment properties including short term rentals, house hacking, long term rentals (buy-to-let) and house-flipping renovation projects. With an investment property, you purchase the land, lot or property with the intention to generate income or make money via appreciation. Any real estate asset that is not your primary residence can be considered an investment property.

Moreover, there are also ways to use your primary home as a form of income. For example, if you have an extra bedroom or a guest house, you can rent it out to help make some extra money or to pay your mortgage. This is known as house-hacking.

If you are planning to purchase a home for the purpose of renting it out, be aware that rental property loans have stricter requirements than typical mortgages. Rental property loans often require that you put a minimum of a 15% down payment.

Rental property mortgage rates are generally 0.50%-0.875% higher than traditional mortgage rates.

In addition to renting out residential spaces as a form of income, there is also ample opportunity in commercial real estate acquisitions. When it comes to commercial real estate finance, there are many ways to generate income from businesses, hotels, malls, shops, offices, factories, warehouses and so on.

There are numerous loans and financial options available for purchasing various types of commercial real estate. For one, you can use the property equity of your commercial acquisition to take out a line of credit. In addition to lines of credit, there are also bridge loans, FHA loans, long term business loans and SBA loans available.

Commercial real estate loans are slightly different from your average loan. In general, commercial real estate loans are issued for shorter terms (think 5-20 years). Furthermore, commercial real estate loans will have lower loan-to-value ratios (around 65-80%). The interest rate to buy a house will generally be lower than the interest rate to buy a commercial property. Additionally, commercial loans will require a higher down payment.

Before you sign any contracts, be sure to do a thorough calculation of this financial burden. Calculating house payments is an essential part of the loan application process. Use our mortgage calculator so that you can estimate your monthly payments. When securing a loan for property, research all potential liabilities and advantages of this investment. Consider expenses like property taxes, insurance, maintenance as well as potential profit opportunities like maximum rental income and appreciation.