Why Investment Loans Are Not All Equal

So, you've decided to invest? This is a decision which could make you serious money down the track, but the first step you need to take is deciding how you're going to finance this investment. Although it might not seem like it now, the loan you choose for this investment could impact on the amount of return you see from your investment so it is important to choose one that meets your exact needs. The first thing you need to do is seek property investment advice, so that you can get an idea of ​​the way in which you'd like to invest. Once you've decided on your investment and the amount you're going to outlay, it's time to think about financing. It's important to remember that one investment loan can vary greatly from the next, so here are a few tips to understanding how they differ and what that means for you …

Be Aware of Application Fees

Just because two loans may seem to have almost identical interest rates, this does not mean you can assume you're getting roughly the same deal. Many banks will market a loan for its seemingly low interest rates, but then surprise you with an exorbitant establishment and application fee when the time comes to apply for the loan, By this time you've usually had pre-approval which means you've probably put an offer in on the house, and it can often be 'too late' to pull out. If you're considering a short-term sale on the property a big application fee can be particularly crippling, because you outlay money you otherwise would've saved just to get a low interest-rate which does not end up making too much difference anyway.

Fixed or Variable?

One of the most important things to decide on when purchasing a loan is whether or not to choose a fixed or variable interest rate. A fixed interest rate stays the same throughout the duration of the loan, but because you are paying for security it is usually set slightly higher. A variable rate, on the other hand, is often lower, but if national interest rates rise, so will the interest on your loan and you could be stuck paying far more than you'd expected.

Expect Flexibility

The fact is, not even two 'identical' loans from the same bank are created equal. While the product may be the same in name, there is a lot of wiggle room for the right customer to bargain his or her way into a better deal, particularly when it comes to a property investment. Because the bank knows that you are investing in something which will in all likelihood make you money, they'll be keen to keep your business, which puts you in a good bargaining position.

Source by Sam Khalil

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