I received an interesting email from ING Direct the other day. I was notified of the lowest mortgage interest rates in years. The exact offer was a 5 year fixed term at 3.89%. The 20-something crowd today is probably to remember the astronomical mortgage interest rates of the 1980s. Today’s mortgage interest rates are FAR lower. Many real estate investors are jumping at this amazing opportunity.
Instead of promoting real estate investing, I wanted to throw out some words of caution when seeing some of the low mortgage interest rates:
Compare mortgage interest rates.
Shop around. Just because mortgage interest rates are low it doesn’t mean that they can’t get lower. If you already have a mortgage, then now could be the perfect time to consider refinancing your home loan. It has worked for many people and it could work top save you thousands of dollars.
Make sure you have sufficient capital.
You can technically use leverage and today’s mortgage interest rates to your advantage, in order to pick up an extra rental property. This could really work out for you. Unfortunately, things could also go wrong. The typical real estate problems could pop up and you could be stuck without a tenant. This is why you need to ensure that you have a sufficient amount of money saved up for this endeavor and that it’s not fully levered.
Don’t purchase a home thinking it will be a wise real estate investment.
Today’s low mortgage rates are a viable reason for a well established real estate investor to pick up an extra piece of property. But, low mortgage interest rates aren’t a good enough reason to purchase your first piece of real estate, if you’re simply not ready financially and emotionally. Buying your first piece of real estate should be done when you find the perfect home, and YOU have the money saved up. By having money saved up, I’m referring to money to cover all of the costs associated with real estate.
