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Apr 2022

Control Investment Home Interest

Interest rates rise and fall, and although we may never see mortgage interest rates hit rock bottom pricing as in 2021, high interest rates don’t need to control your mortgage options. Cash and Home Equity are your key weapons in battling expensive rates, so be diligent with your income and save, save, save. For those of you who have been diligent over the years, you have options to build off of your steadfastness. In the video I use a $350,000 loan to demonstrate leveraging rental properties with high purchase interest rates.

Calculations

Remember that Loan-to-Value (LTV) and Rent-to-Value (RTV) are the key factors when investing in rental property. Check out my cousin’s explanation on RTV for understanding how to maximize your ROI (Return-on-Investment.) While the LTV determines how much house you can buy, RTV determines how much revenue you can receive, which ultimately can impact your mortgage payment. Bottom Line: the more an owner exceeds the monthly mortgage payment, the less interest paid.

30 Year Loan: $350,000
LTV: 80%
Purchase Power: $437,500
Interest Rate: 5.5%
Monthly Mortgage: $1,987/mo
Total 30yr Interest: $365,414

30 Year Loan: $350,000
LTV: 80%
Purchase Power: $437,500
Interest Rate: 5.5%
Double Mortgage: $3,974/mo
Total 9.5yr Interest: $99,244

30 Year Loan: $350,000
LTV: 80%
Purchase Power: $437,500
Interest Rate: 1.75%
Double Mortgage: $1,250/mo
Total 30yr Interest: $100,127

Leveraging LTV and RTV

Keep in mind that lower LTVs (meaning higher down payments) will increase the RTV. Higher RTV means higher excessive mortgage payments. The more excessive the mortgage payment, the less interest paid.

Home Sizes

A single family dwelling with a low enough mortgage payment can bring in a double mortgage payment. Duplexes are a great method to bring in double mortgage payments. Tri-plexes and 4-plexes are even better at reducing long term interest, but they may require lower LTV. Consider the following examples:

$200,000 Single Family Dwelling Purchase

$400,000 Duplex Purchase

$533,000 Triplex Purchase

$600,000 4-plex Purchase

Home Equity Advantage

A $350,000 loan can get you into any of these multi-family homes, but you need more capital to get into the bigger size homes. Home Equity is a great tool to obtain passive income through real estate, and if you patiently build your equity or have done so, you will be in good shape to build generational wealth for kids, grandkids, or even other family or foundations. Remember whatever your situation, there’s a Juicy Solution waiting for you. Shoot me a text, email, or better yet… Give Me A CALL! I would be MORE than happy to look at your situation and help you reach your home dreams through wise borrowing.

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DOWNLOAD | GUIDE TO HOME LOAN PROGRAM BASICS FOR MORTGAGE LENDING