Buying and Selling Property in 2017
Buying a property has been some of the ways in making a move for investment. Real estate investment offers lower risk, less volatile and generally preserves its value. It also has the potential for steady income generation like leasing an office space in a commercial building, rented out a condo unit or flat, an agricultural land with high yielding crops and more. But before engulfing yourself on making plans on what will be the outcome of the property you’ll buy, you must first consider the kind of loan to avail that will offer you great opportunities. Many homeowners nowadays face the dilemma of making the decision between a variety of loan rate. While this depends on your personal situation, you need to carefully consider the benefits and risks of each rate type.
Variable rate mortgages
Based on the name itself, it is changeable that can either fluctuate up or down depending of the economic factors. This kind usually come with an annual fee, but in return you get discounted interest rates and waivers on some upfront fees.
Fixed rate mortgages
The rate is fix for a set length of period of time which usually ranges from one to ten years. Your rates will not go up, meaning your repayment stay at the same level. This allows you to accurately create a budget plan and ensure that your cash flow won’t have any unforeseen detrimental effect if rates are raised. This kind of loan does have hefty break costs, so ensure that you won’t have to exit your loan early. This option is good for those who think that interest rates will rise in the near future. In an economic climate of low interest rates, opting for a fixed interest rate could help you pay off your loan faster. By making the same periodic repayments, you’ll generally repay the principal down quicker than opting for a variable rate loan.
Split rate mortgages
These loans basically cut your loan into portions and then apply a combination of fixed and variable rates to different portions depending on your choice. You might be able to split the loan into more than two portions and have some at variable rates, and some at fixed rates for different set periods. Split rates can help you see a bit of the benefits and risks of both interest rate types.
Interest only – puts part of each settlement towards the outstanding loan amount (the principal) and part towards the interest due on your loan. It pays only the interest due, thus your repayments are lower but on the flip side, your principal will never get smaller making interest-only repayments, as none of your repayments are actually advancing towards the principal.