Your home can serve as your primary residence and you can purchase additional property as an investment. Most people do not pay cash for home investments but require an investment home loan. An investment property may provide you with the following benefits:

Cash Flow – If you rent out your home investment – and your income from the rental exceeds the cost of your home loan – then your investment property will be said to have a positive cash flow. This is the goal of every investment home.

Renting or Flipping properties create cash flow. Rental properties offer a reliable stream of cash flow. Make sure your property is in a good location and well maintained. As a landlord you will have to consider the needs/expectations of your renter. If renting is not for you, then you can purchase, repair, and resell the property for a profit. This is called Flipping. Do your homework here to make sure your repairs to not force you to price your home above the market value of other homes in your area.

Return on taxes – You can deduct your mortgage interest on multiple mortgages, up to $1 million total. The only requirement is that the loan was used for buying, building or improving a home. Your lender will provide you with a Form 1098 which details how much mortgage interest you paid. To get your deduction, fill out a Schedule A under “itemized deductions” on your tax forms.

Home mortgage interest deductions can also include late payment charges and pre-payment penalties. The only requirement is that they were not for a specific service received in connection with your home loan. Figure out the total amount of real estate taxes you paid and deduct this as well. Your interest statement should list this number for you.

Appreciation – As you home increases in value, so will your net worth.

If the cash flow, return on taxes and appreciation benefits sound attractive to you, and you are ready to secure an investment home loan, talk to a bank to determine if you quality. You will have the following investment home loan options available:

• Fixed-Rate Mortgages

• Jumbo Loans

• Adjustable Rate Mortgage (ARM)

• Interest-Only Mortgage Loans

• 100% Financing

• Conforming Loans

• Conventional Loans

• Second Mortgages

• Subprime Mortgages

• Hybrid Mortgages

• Government Loans

Fixed-Rate Investment Home Loan - The mortgage payment will remain the same over the lifetime of the loan. This protects you against rising interest rates and mortgage rates.

Jumbo Investment Home Loan - A Jumbo loan is any loan over $417,000. Jumbo rates are usually a quarter of a percentage higher than a conventional loan.

Adjustable Rate Investment Home Mortgage (ARM) - Generally this rate starts out lower than a fixed rate mortgage adjusts with current interest rates after an initial period. If you think that interest rates will rise in the near future, then it is better to go with a fixed-rate mortgage.

Interest-Only Investment Home Mortgage Loan - Here you pay only the interest on the mortgage generally for about 5-7 years. After this period, you begin paying off the principal or you can pay off the mortgage in full. If you have a tight budget but want to purchase an investment property – this is a good option to consider.

100% Financing for an Investment Home Loan - The bank will provide all of your down payment. You will have to have a high credit score to qualify for this type of loan.

Conforming Loans for Investment Properties - Fannie Mae and Freddie Mac are restricted by law to purchasing single-family mortgages with origination balances below a specific amount, known as the “conforming loan limit.” Loans above this limit are known as jumbo loans.

Maximum Original Principal Balance for Conforming Investment Home Loans for General High-Cost Areas:

Units General High-Cost

1 $417,000

2 $533,850

3 $645,300

4 $801,950

Conventional Investment Home Loan - Those loans which are not guaranteed by the federal government. Interest rates are generally higher as well as the down payment.

Second Investment Home Loan - A second loan taken out on your primary residence. The value of your primary resident secures the second loan. Value is determined by your equity or ownership interest. A bank will assign you a Home Equity Line of Credit. The mortgage amount is based on this number.

Subprime Investment Home Loan - If you have a poor credit history or your debt-to-income ratio is high then a sub-prime mortgage is available, but you will have to pay higher interest rates.

Hybrid Investment Home Loan - This mortgage combines a fixed rate and an adjustable rate. Generally the loan is fixed for a period of time, at which point the loan becomes an adjustable rate.

Government Investment Home Loan - Mortgages guaranteed or insured by the federal government.