Monday, September 18, 2006

Interest Only Mortgages for Wealthy Investor

It is for these kinds of investors that the interest only mortgage options should be used. The borrowers are business people, with business plans, and sufficient knowledge about the workings of commercial and mortgage loans, to understand a good investment from a bad. The commercial mortgage industry is an enormous market, and since most of the monies borrowed exceed the $100,000.00 amount, the international bank rates, or LIBOR, are used for determining the commercial mortgage rates.

Wealthy investor typically means successful investor. These investors are very knowledgeable in the investment process, be it real estate or stocks, they understand the risks they’re taking, and how to minimize the risk for the profit. The real estate investor and the interest only mortgage are a perfect combination. The real estate investor looking to keep an investment for short term can really benefit from the lowered capital investment of the principal payment. Particularly in a situation where the investor is improving the property and the value is sure to increase.

Many of the consumers, who are being presented these interest only loans, are not business people; they’re not wealthy investors searching for a way to invest excess capital. They’re simply consumers searching for a place to live.

The investor usually has an investment analyst at his or her disposal, with tools and resources that can decide a good investment, the risk involved, and measure it against the amount of risk the investor is willing to receive. All these factors go into determining if an investment is a buy or sell. This particular borrower fully comprehends the risks involved in an interest only mortgage, and has spent the time needed to determine if the product is correct for his investment needs. The real estate investor is a business person, not a consumer borrowing to pay for a place to live

When you contrast this with the consumer buy or sell, you’re not even comparing apples to apples.

Some investment opportunities for the wealth-building investor will at some end require an extra amount of monies to turn the investment into a profitable situation; do you suppose the average consumer has another ten or fifteen thousand dollars at their disposal, in case the interest only option should become a problem, or they’re home should need unforeseen repairs, in order to remain at the purchase value? Most likely, the reply here would be no.

The short-term real estate investor or developer wants to keep his or her expenditures at the smallest amount during this investment period, saving as much of the expendable cash as possible for the real renovation or preparation for sale of the property itself.

The less money used up on mortgage payments, or in the investor’s eyes, investment cost, the more money there is to actively and aggressively pursue potential buyers and raise the value of the property. This is good business, and good business is based on sound business choices.

It is here that every buyer needs to stop and reconsider their borrowing situation against that of the investor. The wealth-building investor is a business person. Their livelihood depends on their knowledge of the product they market, in this case real estate. Usually, a business person is not going to take a risk with their personal investments; unlike the risks they will take with a business investment. Why? Because the home they share with their family is much more significant than a business deal, most are not willing to risk losing their home.

I still am not an advocate of the interest only mortgages, but for some conditions they are the best option. In a business setting, when many factors have been carefully discussed, and the interest only option has proven itself to be the best choice, I believe the interest only mortgage should be used. But this option should stay as the knowledge of LIBOR is among the masses, virtually unknown.

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Disclaimer:
The general information provided by http://MortgagePalace.blogspot.com is intended as an educational purpose only, and should not be interpreted as legal advice. The law varies drastically by location and legal specialty, and http://MortgagePalace.blogspot.com makes no promises about the accuracy or completeness of the information provided. You should not rely on our information when making legal decisions. We recommend that you consult with a lawyer to get professional legal advice on how best to deal with your situation.
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