At some point during this past year, most of us have been stuck inside our homes and apartments due to various COVID-19 “lock-downs” and restrictions. Some people may have grown tired of their homes, some, unfortunately, may have lost them. However, if you are able to, there may be no better time than now to buy a house for personal use or as an investment. Depending on where in the world you live, financing options and terminology may differ, but the fundamentals are the same. You can borrow money from an entity or individual(s) and repay them the funds plus a little extra called “interest”. Here are some options and ideas on how to finance your purchase of a new house.
Mortgage Loans
Most of us can’t afford to pay for a house upfront and will opt for a mortgage loan. This involves borrowing the money from the bank to buy the house and paying the money back plus the interest. If you cannot pay the loan back, the bank can sell your house to repay the money they lend you. In the US there are various types of mortgage loans such as conventional mortgages, Jumbo mortgages, Government-insured mortgages, fixed-rate mortgages, and adjustable-rate mortgages. At the moment, 30-year and 20-year fixed-rate interest rates are 2.75%, which is low and makes it a good time to borrow money.
Partnerships
Another way to finance buying property is to join up with others and obtain a bigger loan by pooling your funds. For those who are thinking of capitalizing on the current state of the property cycle, you can set up a business with fellow investors. If you rent out the homes you purchase with the loan, the monthly rentals can pay for your loan installments, and hopefully, you will make a profit and significant capital gains when the property cycle improves.
You can register an LLC (Limited Liability Company) to reduce your personal risk exposure and enjoy some potential tax benefits. The experts at fatstacksblog.com/swyft-filings-review/ guide readers through the LLC process. The process of setting up an LLC can be fairly quick and painless, there are a lot of companies out there helping to streamline the registering of your business.
Pay cash
If you can sell your existing property or something else of significant value, then paying cash upfront if the property is already built is a good idea. If the property is still under construction, or if construction has not started yet, then you run the risk of the construction company or property developer running out of money and not completing the project.
Crowdfunding
New technology and platforms are allowing large amounts of people to contribute small amounts to fund big projects. There are numerous crowdfunding platforms and specifically property-related crowdfunding platform options. These are opening up the property investment market to individuals who wouldn’t usually be able to borrow and invest because of the financial and legal barriers to entry. This is an option to raise money for your real estate investment business or to finance your own purchase of a property. In the same way that your monthly repayments would go to the bank, they would be split up among the various investors via the crowdfunding platform.
Private Loans And Angel Investing
At times, it can be difficult to get a loan from the bank. If you are lucky enough to know a high-net-worth individual, through work or friends, you could approach them for a private loan. You could negotiate your own interest rate, payback period, and monthly installments. Most commonly, private loans are often from the “bank of mom and dad”. For those fortunate enough, you could negotiate your own loan, as you would with the bank, with close family and friends who would like to earn interest and feel good about helping out. These private loans may be more common than you realize as it is not always publicized. If you are courageous enough, one way to gauge interest is to post on social media. Some people may share your post which extends its reach, improving the chances that you will find someone willing to help.
It’s been an incredibly difficult year for everyone, however, there is an opportunity in it. Property prices and interest rates are currently extremely low. For those lucky enough to finance a property during this period of time, they have the chance to make a great investment.