Real Estate Financing in Jacksonville, FL: What You Need to Know

Are you involved in the world of real estate in Jacksonville, FL? Investing in real estate allows you to enjoy passive income opportunities. The income you earn can help you expand your real estate portfolio.

Owning real estate can be a hedge against market volatility. It's a great way to diversify your portfolio. But because of the high start-up costs, investors often need to look into financing options.

Real estate financing is essential for investors and landlords in Jacksonville, FL. Keep reading as we explain how Jacksonville property management services can help you reach your financial goals.

Investment Property Financing

If you are a real estate investor, you know that choosing the wrong kind of financing can have negative consequences. What are the options available for real estate financing? What are the requirements of each? Let's take a look.

Conventional Loan

Most homeowners are familiar with conventional bank loans. This type of financing is a mortgage loan that conforms to the guidelines set by Fannie Mae or Freddie Mac. These loans are not backed by the federal government.

The buyer puts down 20% of the property's purchase price when buying a home as a primary residence. For an investment property, it's not uncommon for the lender to require a 30% down payment.

Investors' personal credit scores and credit history come into play when applying for a conventional loan. These factors help determine the interest rate.

Borrowers are expected to have at least six months of cash to cover loan obligations, as future rental income is not a factor.

Hard Money Loan

Are you planning to flip an investment property rather than renting it out or developing it? If so, a hard money loan might fit the bill.

It's a short-term loan that is easier to qualify for compared to a conventional loan. This type of loan is focused on the property's profitability.

The lender uses the home's after-repair value (ARV) to determine whether you'll be able to repay the loan. The funding comes in a matter of days, much quicker than a conventional loan. Interest rates are very high though, as high as 18%.

Home Equity

If you already own a home, it's possible to borrow up to 80% of the home's equity to buy an investment property. The options include a home equity loan, home equity line of credit (HELOC), or cash-out refinance.

If you choose a HELOC, the monthly payments are often interest only and it usually comes with a variable rate which can increase. Cash-out refinance loans have a fixed rate but may lengthen the term of your existing mortgage. You may end up paying more interest on your primary residence.