It is for these types of investors that the interest only mortgage options should be used. The borrowers are business people, with business plans, and enough knowledge about the workings of commercial and mortgage loans, to understand a good investment from a bad.
The commercial mortgage industry is a huge 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 usually means successful investor. These investors are very educated in the investment process, be it real estate or stocks, they understand the risks they're taking, and how to maximize the risk for the profit.
The real estate investor and the interest only mortgage are a perfect pairing. The real estate investor looking to retain an investment for short term can really benefit from the lowered capital investment of the principal payment. Especially in a situation where the investor is improving the property and the value is certain to increase.
Many of the consumers, who are being offered these interest only loans, are not business people; they're not wealthy investors looking for a way to invest excess capital. They're simply consumers looking for a place to live.
The investor normally has an investment analyst at his or her disposal, with tools and resources that can determine a good investment, the risk involved, and measure it against the amount of risk the investor is willing to take. All these factors go into determining if an investment is a buy or sell.
This particular borrower fully understands the risks involved in an interest only mortgage, and has spent the time needed to determine if the product is right 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 compare 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 point require an additional 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 unexpected repairs, in order to remain at the purchase value? Most likely, the answer here would be no.
The short-term real estate investor or developer wants to keep his or her expenditures at a minimum during this investment period, saving as much of the expendable cash as possible for the actual renovation or preparation for sale of the property itself.
The less money spent on mortgage payments, or in the investor's eyes, investment expense, the more money there is to actively and aggressively pursue potential buyers and increase the value of the property. This is good business, and good business is based on sound business decisions.
It is here that every consumer needs to stop and re-evaluate 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. Normally, a business person is not going to take a risk with their personal investments; not like the risks they will take with a business investment.
Why? Because the home they share with their family is much more important 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 situations they are the best option.
In a business setting, when many factors have been thoroughly discussed, and the interest only option has proven itself to be the best choice, I think the interest only mortgage should be used. But this option should remain as the knowledge of LIBOR is among the masses, virtually unknown.
Author Resource:-
Uchenna Ani-Okoye is an internet marketing advisor and co founder of Free Affiliate Programs
For more information and resource links on home loans visit: Home Loan Lending
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