Mortgages and Real Estate Investment


Mortgages and Real Estate Investment

Real Estate mortgages are a key tool in real estate investing. Real estate mortgages are financing secured by real estate; the most common example is the mortgage you likely used to purchase your home. Of course, similar real estate secured mortgages can be used can be used to purchase real estate investments or even to take equity out of real estate for other investments.

Home mortgages or other real estate secured mortgages secured by real estate often allow the purchase of real estate with as little as 5% or 10% down. This provides what is called “leverage;” a relatively small amount of money can be used to control a much larger investment.

Leverage from real estate mortgages can work to your benefit in an appreciating market, as the appreciation on the whole value of the property represents a larger return on a much smaller investment of a down payment.

On the other hand, leverage can work against you in a declining market (as the US has recently experienced). Like leveraged returns in an appreciating market, losses can be leveraged in a declining market.

Mortgages are commonly secured either from direct lenders—those companies who fund the mortgages themselves—or from mortgage brokers, who are intermediaries that match mortgage providers with those desiring mortgage financing.

Although rules vary from state to state, typically mortgage brokers and providers must be licensed in some way by the state. Often you can search out licensing information at your state’s web site (frequently licensing is through the Department of Real Estate or Department of Corporations).


Why Consider Real Estate Investments?

Real Estate Investments can be an important part of your overall pre-retirement and retirement investment portfolio.

The most important real estate investment for many Americans is their own home. All real estate investments, whether your own home or any one of a variety of other real estate investments, can provide an important source of retirement income and tax advantages as you near and enter retirement.

Real estate investment should be a key part of your retirement plan. You may want to work with your financial advisor and real estate investment advisor to maximize your use of your real estate investment.