Second mortgages for investments
26 June 2008
Second mortgages used to gain investment capital for stock purchases or the purchase of investment properties will often be both fixed rate and interest only. Fixed rate second mortgages taken out as an interest only loan can be useful for investors due to the predictability and lower cost of payments. By waiting for a beneficial fixed rate, users of second mortgages can potentially make the most profit from their investments.
It is important to have an investment with the right time scale if you use fixed rate, interest only second mortgages. As you will be expected to repay the principle at the end of your loan, you will want to have made a profit by the time the interest only loan term has ended. There will also be the risk that you may end up having made a loss. Often, interest only mortgages will allow you to begin an interest and principle mortgage at the end of the interest only term, so this may only be inconvenient rather than ruinous.
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