In Case You Missed the Sub-Prime Crisis: Don’t Get Variable Rate Loans!
Just in case you’ve been asleep for the last year: don’t take out variable rate loans on your investment properties!
Come on folks, if you have taken any time to look at what interest rates have been doing over the last forty years, you will notice that the rates we are seeing right now are near all time lows.
If there were a perfect time for locking in a fixed rate loan, when would that be? The answer is this: when rates are at or near their all time lows.
If there were a time for taking a chance on a variable rate loan, when would that be? The answer is, when rates are high and likely to come down AND when variable rates are lower than fixed rates.
If you look at what money is being offered at today, you will see that interest rates are at or near all time lows. Can interest rates go much lower than what we are seeing now? Not likely. So wouldn’t now be a good time to borrow money at fixed rates?
You will also see that fixed interest rates are very competitive with variable rates. Often the attraction of variable rate financing is the teaser rate that is so much lower than what a fixed rate would be.
These teaser rates tempt you with 3 years at rates that are less than a fixed rate loan. If you only intend to be in the property for three years or less it looks very appealing.
Don’t be fooled!
If the recent crisis has taught us anything, it’s that the future is uncertain and you might be holding your properties far longer than the 3 years you originally anticipated. Better to have good fixed rate financing locked in when it is available–and available at a great rate–than to lose the option completely when markets and lending practices change.
My message to you: when in doubt, get fixed rate financing over variable rate financing… ALWAYS!
Until my next post,
James
P.S. Financing your investment properties is something that new investors tend to spend a lot of time learning. With our Real Estate Investor Bronze Membership we teach, via over 100 real estate course downloads you get plus on-going training and consulting, how to do traditional financing with banks and mortgage brokers, owner financing strategies (and yes there is a huge number of them out there if you know how) as well as strategies for using private lenders. Sign up for our Real Estate Investor Bronze Membership to tap into our resources, training and consulting now and take your real estate investing business to the next level.
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