Long-Term Financing Loans: Are They Right for You?


You’ve got your heart set on being a landlord. You can taste the monthly income and the skyrocketing asset value in your sleep. But, like many would-be real estate investors, you’ve got a problem:

You’re not sure how to finance your rental home purchase.

As a general rule of thumb, there are two types of loan options that you’ll likely be considering — short-term and long-term. And for second mortgages and investment property purchases, there’s a lot to like about long-term financing. Read on to find out if a long-term home loan makes sense for you.

  1. You Want to Make Smaller Monthly Payments

Picture this.

You’ve achieved a 100 percent occupancy rate and you’ve spent the better part of a year building up your income. But then one day, a tenant gives you a call and says, “I’ve just accepted a position in another state so I can’t renew my lease.”.

If you happen to have a hard time finding tenants, would you rather pay $1000 a month or $1700 a month to maintain the property? All things being equal, you’d rather pay the lower amount, right?

One of the benefits of getting a long-term finance loan for rental property is that it often comes with a longer repayment period. This, in turn, often means that your monthly payments will be correspondingly lower.

  1. You Want to Borrow a Large Sum of Money

In the second quarter of 2021, the median home sale price was $374,900. And in markets like Los Angeles or New York, median prices can go up even higher.

With short-term loans, borrowing five or six figures could result in you spending a substantial sum on interest payments alone. But with long-term loans, you can typically secure a lower fixed interest rate. If you value predictability in your financial agreements, there’s a lot to like about this kind of setup.

In addition, if you’re thinking about pursuing long-term financing for rental properties, there are plenty of banks and investing-friendly lenders to choose from. This gives you more options to shop around and find more favorable repayment terms.

  1. You’re Not in a Hurry

Going back to 2020, the real estate market has involved housing shortages and low interest rates. This combination has led to an unbelievably competitive housing market. As such, even a few hours of delay between your application and your approval could result in the loss of your dream property.

However, long-term financing often involves longer approval times. If you pursue this as a financing loan option, you may need to spend more time planning and coordinating as you look for viable investment properties.

Need a Loan for Your Rental Property? Try Long-Term Financing!

Although real estate is often promoted as a no-brainer investment, finding the right home loan can be tricky. Long-term financing can help you secure larger amounts at a lower interest rate. If you’re thinking about purchasing a rental home, this financial option could be well worth exploring.

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