Financing investment properties is an important part of building a property investment portfolio, whether it is to buy a home or investment property. Management of real estate investment funds must be an ongoing process where one person owns investment properties and success of a real estate investor will often refer back to their financial ability.

Financing is important at any time, but currently with the financial world, how it has been awhile and with investments in real estate in general, have a good knowledge of the various loans are helpful to make a decision will benefit you both short term and long term.

It seems there is a certainty at the moment and that is that we can expect interest rates to go up (or so we are told on a regular basis). When they come to change, is anyone’s guess, although we expect sooner rather than later, but at what speed they go up is the most critical factor.

Here are two considerations to make when you set your loan on your investment characteristics:

1. What interest rate you have been quoted and what you will pay over time, and

2. if you want to pay money on your loan as you make your repayments.

With regard to both these factors, here are some split loan proposal for consideration for investment property financing:

Fixed rate – interest only and interest plus principal. This is where the interest is fixed on both loans, but only one is paid off the loan as well. The interest only loan allows for a slightly lower recovery value than if the loan was at fixed interest plus capital. With this arrangement the owner has a set amount to find for each payment and this can be a very good system for those starting real estate investing or for those on fixed incomes with little room to move in installments.

Adjustable rate – interest only and interest plus principal. An owner can go on this way if they do not intend to hold property for a longer period, since these loans are usually at a lower rate initially than it is a fixed rate loan. The owner takes the chance that interest rates will not go up much before they can be quite property. A loan arrangement like this is a good one to have if it seems likely that interest rates will go down, but it seems unlikely at present.

Fixed rate and variable rate – fixed rate / interest only and variable interest plus repayments. This loan combination can fit where the owner wants to take a larger portion of the loan on fixed-interest only to keep repayments down, but also captures the possibility of the floating rate on a small loan, and still make some repayments.

Adjustable rate and fixed rate – variable rate / interest only and fixed interest plus repayments. Here the owner would sign an adjustable / interest only loans and loans with fixed interest and principal, which in turn will provide a repayment for the loan. It would be more ideal for the owner who intends to keep the property for a longer period and at the same time want to pay down some of the loan and build equity in the property. Probably the fixed interest and capital repayment loan would be a bigger one with the intent to build equity.

Interest only – fixed rate and variable rate. Here owner decides to have an interest only loan but a loan is fixed rate and the other on an adjustable-rate mortgages. This loan is set up gives the advantage to a fixed rate if interest rates rise high, but benefit if interest rates go down.

Interest and principal – fixed interest plus repayment of the loans and adjustable-plus installments. It’s not such a popular split loan because if the payment of capital out with both types of loans, the reduction in repayment amount, which is the most common cause of a split loan, has not changed dramatically.

My suggestion is to consider your options, look at your long term plans for the property investment and work out what type of split loan would your current and long-term real estate investing. It is very possible to divide the loans may be the way to go, even if you do not buy, but refinancing your investment property financing.