What is a flat rate mortgage?
A flat rate mortgage is a single mortgage that covers multiple properties, with the group of assets serving as collateral for the loan. Real estate developers and larger investors often buy more than one property at a time, so a flat rate mortgage allows them to simplify these transactions with one loan.
The flat rate mortgage also allows the borrower to sell one property from the group and keep the loan for the others without having to pay them off.
Flat rate mortgages apply to both commercial and personal transactions, including those where Apartment buildings or flat Building. They are also used by companies or developers who buy and Turn around at home.
“Although typically used in a commercial context, there are residential property owners who use a flat-rate mortgage to fund a portfolio of rental properties,” said Greg McBride, CFA, chief financial analyst at Bankrate.
A lump sum mortgage is also known as a lump sum loan and can be refinanced like any other mortgage.
Who should get a flat rate mortgage?
Flat rate mortgages are intended for businesses that buy homes in bulk, or experienced investors or landlords who own a portfolio of properties, either commercial or residential.
“This is not for a newbie, mom-and-pop landlord looking to get into full real estate management overnight,” says McBride.
They are also not intended for a primary and secondary residence borrower.
Advantages and disadvantages of a flat rate mortgage
All mortgages come with it Closing costsBut there can be some savings with a flat-rate mortgage since you only get one loan, as opposed to having separate loans for each property, says McBride. These savings translate into more cash flow for additional real estate or other projects.
However, flat-rate mortgages require a higher down payment – north of 25 percent up to 50 percent – which can be a barrier, adds McBride. If any of the properties securing the loan is sold, you will have to pay back the portion of the loan that secured that property – you can’t just pocket it.
The flat-rate mortgage can be a. be structured Balloon payment, also. This allows the borrower to make lower payments for a period of time, followed by paying a larger lump sum at the same time. Sometimes the loan is structured in such a way that the borrower only pays interest at first. This type of arrangement is typically offered to borrowers with excellent credit ratings and sizeable assets.
How to Find a Flat Rate Lender
Mortgage lenders that specialize in flat rate mortgages are not as readily available as those that offer other types of loans. Start by researching commercial lenders and making a note of their rates, fees, and down payment requirements.
“Flat rate mortgages aren’t available,” says McBride. “You have to do a bit of research to find lenders and mortgage brokers who will work with borrowers on these types of loans. Often times, banks or lenders that offer many business loans have this as part of their product line. “