The practice of ‘house flipping’ has become more popular over the past ten years or so, driven by the popularity of home improvement TV shows in many parts of the world. The idea behind house flipping is to buy an old, worn down property at a bargain price, invest in renovations and improvements and then put the house back on the market and sell it for a profit.
House Flipping and Interest Only Loans
Often, house flippers will finance their property purchases with interest only loans. At Peter Dunn Finance, we help clients secure interest only loans in the Perth area. If you are interested in getting into the house flipping game—or if you simply want to avoid making principal payments on your home loan—you might consider discussing one of these loans with us.
As the name suggests, interest only loans only require homebuyers to pay the interest on their loans—at least for the first few years of financing. In traditional mortgage lending, owners pay both interest and principal together, building equity along the way. Interest only loans, since they don’t include principal payments, are markedly less expensive than traditional mortgage loans.
Interest-only loans can be a risky option, particularly if you plan to live in a home for several years. Deferring the principal payments means that you don’t build your equity beyond the percentage purchased with your down payment. The interest only period also eventually ends, usually calling for buyers to either put down a substantial lump sum payment or start making principal payments every month. While interest-only payments are lower than standard mortgage payments, your payments will be higher than standard mortgage payments once the interest-only period ends. For these reasons, we advise buyers to consult a broker before going forward with interest only loans in Fremantle or Armadale.
With that said, the advantages of interest only loans often outweigh the risks for house flippers—, particularly for experienced ones. At Peter Dunn Finance, clients that come to us for interest only loans in South Perth or Fremantle are drawn to them because they free up cash for other investments. This liquidity is especially important for flippers, who want to save as much money as possible on the mortgage so they can invest more in improvements and renovations. Furthermore, since flippers generally intend to improve homes and sell them again in relatively quick succession, they rarely get past the interest only period. Thus, they can sell the home at a profit without ever having to make principal payments on the mortgage.
Learn More about Interest Only Loans in Armadale, South Perth or Fremantle
House flipping and interest only loans can both be risky in some situations, but they can also yield big potential rewards in the right cases. At Peter Dunn Finance, we can help you weigh the pros and cons of interest only financing and assist you in deciding on what type of loan to pursue. Whether you are looking to flip a house or just want to free up money for other investments, shooting for an interest only loan in Perth might just be the right way to go. To find out, call us on 0427 947 480.