When it comes to renting an apartment, it’s not quite as simple as whipping out the family American Express card. Apartments require cold hard cash, either through a check or money order. And since the initial amount due can be quite high, it’s best to start saving up early when you’re thinking about moving. Typical move in costs include first month’s rent, an application fee, and a security deposit. And if you’ve enlisted the help of a broker, you’ll have to pay them off as well. Apartment loans come into play if you’re actually investing in an apartment complex by purchasing one or many units. These could be for people wanting to become property managers, or individuals looking for an investment they can live in!
What is an apartment loan?
If you want to purchase an apartment, and you’re not independently wealthy, you’ll probably go to a bank or other lending institution in search of an apartment loan. The type you get can depend on how long you plan on owning the apartment.
Types of Loans
If you are only planning on owning the apartment for 2 years or so, you will most likely obtain an adjustable rate mortgage. This type of loan has a flexible interest rate that will fluctuate depending on a multitude of factors. The benefit of this type of loan is its low initial interest rate. Because the rate is subject to fluctuation throughout its lifetime, banks offer a lower introductory rate in order to offset any future risk.
If you’re in it for the long haul, however, you might look into a fixed rate loan. This type of apartment loan is a good idea if interest rates are low when you enter into the loan agreement. Obviously, if they’re high, you don’t want to be locked into them for the life of the loan. This is a less risky type of loan for those of us who don’t like to live on the edge.
A stated income loan is a good option if you would have difficulty proving your income. The loan is based on your stated income, and verified assets. You also must show proof of employment history, which should be stable for the past two years. This type of apartment loan can be good for self-employed or retired people.
How to get an apartment loan
There are many options when looking for an apartment loan. You can go to a bank, look for an individual investor, or other lending institution. If the loan amount is very high, a bank might not be your best option. Bank’s interest rates are sometimes sky high on large loans, and an individual or direct investor might offer a more reasonable rate. Many lending institutions, including banks, have recently started offering more non-recourse loans, which is good news for borrowers. This means that if you default on the loan, and fail to repay it in full, the lender can only take the property from you, rather than any – or all – of your other assets. It’s essential that when looking for possible lenders, you search carefully in order to get the best deal. Take time to sit down with the lender and make sure you know all the details of the prospective loan.