Alternative Ways to Finance A Property Investment

With a 70% growth in London property and south-east England enjoying a fair 37% growth, it’s easy to understand that why consumers consider investing in property more than retirement schemes. The effect the subprime mortgage disaster had on pension schemes is not something the investor will easily forget; hence, the move to invest in the properties directly. But purchasing a property is not an easy task as lending criteria tighten, which may make it more difficult to acquire more assets. These are a few alternatives to consider.

Use Existing Equity to Finance a Smaller Loan

Homeowners who already have an existing property where the balance outstanding on their mortgages are low can tap into the equity to fund their next property. The equity is the difference between the balance owing and the value of the property. This is often a cheaper way to finance another purchase, as the costs with the attorneys might be lower. It is also far less paperwork and hassle for those who have a good relationship with their bank.

Smaller Loans for Smaller Purchases

There are a number of ways to raise capital when the loan amount is too small to apply for a mortgage loan. This is especially true for those who are using some of their own capital and merely need to fund the difference or shortfall. Credit cards may seem like a simple option, but the interest rates could be exorbitant especially if customers are unable to pay off the balance in a few months. Those who need a bit longer to repay the balance should consider a personal. These loans tend to be quick and easy and customers can find many suitable options online, as can be seen with this Norwegian example.

Rent With the Option to Own

This is not a normal agreement type but does take place from time to time. It is especially common between those who have an interest in a property but don’t meet the loan criteria as yet. With this option, they can occupy the property and have an agreement in place with the owner that the payments that have been made towards the rental are discounted from the purchase price. This agreement is also known as an Option to Purchase Agreement and the terms are decided between both parties.

Property investment can be daunting, but as the loans are repaid and properties are freed up, owners are able to enjoy their rental income with only taxation to worry about. This is a good source of investment for those who choose the right location and at the right price. A financial adviser, trusted real estate broker, and an attorney can all add value in the decision-making process.

Image credit: Terrah Holly