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Are
You Financing Rental Property Mortgage?
Get Your Cheap Mortgage Rates PART 2
Take
another look at your rental property mortgage again. Are you sure you
are getting the absolute best deal when financing rental property?
Discover what are the quickest and easiest ways to further lower
mortgage payments in this Part
2 of our Guide to Cheap Mortgage Rates.
Have You Read
Part 1? If No, Click
for Part 1
of this Rental Property Mortgage Guide.
Brush
up and Boost Your Credit Scores Before Applying for a Loan
Whenever
mortgage lenders grant you a
rental property loan, they are
taking a risk hoping that you will foot your mortgage payments on time
every month. If you can convince them that you are a safe choice and is
highly
likely to default on your loans, they will definitely be happy to offer
you
cheap mortgage rates.
Your credit score is one of the most important things lenders look
at to decide if you are a low or high risk borrower. You can
obtain your
credit report from Equifax, Experian or TransUnion.
Credit scores range 300 to 850. If you score above 750, then
congratulations
you have good credit. However if your credit score dips below
620, then it's time to do something about it because you will have a
hard time finding cheap mortgage rates when financing rental
property.
So what are quick yet effective fixes that you can use to boost your
credit score in a short time? Before applying for your rental property
mortgages, don't close any old accounts even if you are not using them.
Doing so will lower your credit score because it shortens the length
of your reported credit history.
Always pay
your bill on time and avoid late or non-payment of any bills
because your credit score can take a serious blow even for a single
overdue bill. To avoid late payments, it's best to set your bills on
automation deduction from your bank accounts.
Before you have your hands on a rental property loan, avoid opening
new accounts or taking on other debts. Doing so will increase the
number of companies running a credit check on you and your credit
scores will take a hit.
Is
Your "Zero Cost" Rental Property Mortgage Really a Free Lunch?
If your lender comes by and drops a mortgage loan with no closing costs
in your lap, tread very carefully and ask a lot of questions.
Since financing rental property will usually cost you a couple of
thousand dollars in agent, transaction and closing costs, it makes
these zero-cost mortgages seem really appealing at the first glance.
However
many investors have the learned the hard way
that there is rarely a free lunch when it comes to rental property
mortgages. The costs
that you save right now will often translate to a slightly higher
interest rate over the lifetime of your rental property mortgage.
The sneaky thing is that the extra interest rates that you have to fork
out may seem like peanuts but can work out to be sizable sums. Let's
say you have a $200,000 30 year mortgage at 8% interest rate. What will
happen if you choose a no-cost mortgage which pushes your mortgage rate
to 8.25%?
While this 0.25% additional interest will only increase your mortgage
payments by just $35 every month, you will end up paying about $12,600
more over the course of your 30 year mortgage.
"Zero cost" rental property mortgage often turn out to be a ugly deal
once you work out the numbers which is why we highly recommend you to
avoid them and just cough up the closing costs.
Moving
on, we will reveal 2 more proven methods that successful investors rely
on to snag cheap mortgage rates when financing rental property:
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