If you buy a 100,000 house and put 20 percent down, you will have a mortgage payment, but the returns on your cash invested increase because you are using much less cash. If you are paying a 4 percent interest rate, your principal and interest payment will be about 382 (check out the bank rate mortgage calculator for calculating mortgage payments).
You are only making 118 a month cash flow after subtracting the mortgage payment, but you are making 7 percent cash on cash return due to the lower initial investment. Additional benefits of getting a loan on a rental property.
Even though the cash on cash return is 7 percent, you are actually making much more than a 7 percent total return in the above scenario. You are also paying down the principle on the loan by an average of 118 each month. That 10000 cash loan equals another 7 percent return on your money that you would not have on a cash purchase.
You have more than doubled your return by getting a mortgage instead of paying cash. The exciting part about using leverage is when you get a higher cash flow, the returns increase even more. If 10000 cash loan can make 800 a month cash flow without a mortgage, you will be making 9.
Total repayments 0made up of an establishment fee of 0 and interest of 0. The repayment amount 10000 cash loan based on the variables selected, is subject to our assessment and suitability, and other important terms and conditions apply.
Total repayments 10made up of an establishment fee of 800 and interest of 2,400. The repayment amount is based on the variables selected, is subject to our assessment and suitability, and other important terms and conditions apply.
WARNING: This comparison rate is true only for the examples given and may not include all 10000 cash loan and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Local Cash Now.
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