When homeowners or business owners need a first or second mortgage on their property, but don’t have enough credit to be approved by a bank, or have already obtained a loan from a lender who won’t give them additional funds, they often turn to lenders. Lenders are individuals or companies, which don’t necessarily need to be a financial institution that can provide borrowers with the loan they require in the way of a mortgage. While the benefits of mortgages to the borrowers are evident, with options opening to them that weren’t there before, investing in mortgages can also be a great opportunity – especially when other forms of investing are impractical.
All about investing in mortgages
Real estate has always been known as a much more reliable and stable form of financing over other forms, such as the stock market. And while there are many ways to invest in real estate, investing in mortgages can offer an enormous return of 10% or more. When you offer a mortgage to a borrower, there will be interest attached to the principal amount of the loan, and that interest will be 100% profit to you. The borrower will be the homeowner so you won’t have the expense of keeping up the property as you would with becoming a landlord; and you don’t have to worry about ever selling the property, as you would if you decided to flip properties.
There is little risk involved when investing in mortgages. Approval for these types of loans typically requires only equity on the borrower’s part and that investment is put up as collateral for the loan. Should the borrower default on the loan, the property would become yours, which you could use or sell for just as much, if not more, profit. Because of this possible scenario, it’s also recommended that mortgage investors also work very closely with knowledgeable real estate agents who know the area and can help if you need to enter the market.
While you might think that you’d have to have an enormous amount of cash sitting around to invest in mortgages, this is not the case. Lines of credit can be used, or investors can pool together to come up with the cash, and then split the profits equally between them which can be a real alternative even for investors who do have a significant amount of money, as it can mean more lending and more borrowing with interest charges, and more profit, attached.
Investing in mortgages can also be an excellent way to make yourself feel good about your investment. Mortgage lenders are also called “angel investors,” and it’s no wonder why. These incredibly flexible options open doors for home and property owners that otherwise wouldn’t be able to achieve their dreams, whatever those are.
Knowing that you’re helping people while you turn a profit is one reason many people choose this investing over any other. And the fact that real estate is such a sound investment to begin with is the just bonus on top of it all.