Back in the old days, most real estate investors tend to cash in 20% or more of their money as so to acquire a loan for the rest 80% or less, which is a very common way to finance their newly bought properties. However as time goes by, more and more options started to exist to provide investors with a more flexible way of financing a property.
Lending institutions these days offer a much larger variety of loan and financing options for those who seek to purchase their very own properties and especially real estate investors.
Acquiring a line of credit is among one of the most common financing options available. In this case, a buyer will have to put in 5% of his money as a down payment. While the rest 15% will be obtained by taking out a line of credit. Though the credit interest rate may be higher than regular mortgage loans, the amount of monthly repayments will still be slightly lower as the loan amount is relatively low.
However there is one significant downside of having less than 20% to 25% of the down payment for the particular property, which usually occurs when the buyer is required to obtain private mortgage insurance. Since the insurance premium is based on the amount of mortgage taken, it will be quite high if you are putting a low down payment. Hence, it will be better if you could go for a higher amount of down payment, 20 to 25 percent, to help save more of your money on the future monthly payments. Read what I've written about Real Estate Financing Methods in the next page.