Nathan Colmer | Van Dyk Group
C: 609.290.4293 | O: 609.492.1511
LBI investment loans are a common method of financing in the Long Beach Island real estate market. They are most commonly used for the purchase of rental properties but can also be used for the purchase of a "flip" or speculative investment. The terms and interest rates will vary depending on the lender and the current market but typically an investment loan will carry a slightly higher interest rate and the interest will not be tax deductible. Investment loans do have an added benefit of allowing for a 1031 tax deferred exchange.
There are a number of alternative strategies for financing a home in the LBI real estate market. For example:
While there are some excellent opportunities to purchase a home in the LBI real estate market, it is important to make sure you can comfortably afford the home purchase. Depending on the intended use of the home, there are some creative solutions to buying a home in the LBI real estate market and alternative financing strategies on Long Beach Island. Some of these can result in an easier process and a more affordable carrying costs for your second home or investment property.
As I mention above, an investment loan will be used to purchase a rental investment propety. One of the major advantages of an investment loan has to do with qualification. Some lenders will allow the rental income for a property to be used to help qualify a borrower for the loan. While this is certainly not intended to push a buyer into a house they cannot afford, it can be very helpful for a self-empoyed borrower.
Since the interest rate of an investment loan tends to be higher than a second home mortgage, it is important to understand how mortgage rates are deteremiend in the LBNI real estate market. A few of the most common determinants are:
Above all else, the current state of the economy has the most influence on LBI real estate interest rates. As the economy changes, so too do interest rates change. It’s important to understand that there is no “one” interest rate. rates can fluctuate daily depending on the greater economic factors at work. These rate changes will filter down into the different loan products, the length of the loan and the amount of money the borrower is seeking.
Since a lending institution such as a bank is assuming a great deal of risk that the borrower may not repay the money, the likelihood of that the money be repaid (or not repaid) will influence the interest rate of a home on LBI. Things such as the credit score of the borrower, the amount of the down payment, the borrower’s current amount of debt and the length of the loan. Overall incestment loans are considered to be riskier than a second home since they will not be occupied by the borrower. Therefore rates tend to trend higher.
The type of home that is purchased in the Long Beach Island real estate market will also play a rile. Generally speaking, interest rates will be higher for duplexes and commercial properties as they are considered to be investment properties whereas single family homes and condos (assuming they are reported as a second home) will be lower.