Which type of loan is commonly used by investors?

The choice of an Interest Only Loan is particularly appealing to investors for a number of reasons. This type of loan allows the borrower to pay only the interest for a certain period, typically five to ten years, without any repayment of the principal. This feature provides increased cash flow during the initial phase of the loan, which is a significant advantage for investors looking to maximize their capital for other investments or operational expenses.

Investors often prioritize cash flow, and with an Interest Only Loan, they can reinvest the money that would have gone toward principal payments into additional properties or projects. Furthermore, this type of loan is beneficial in a rising market where property values are expected to increase; investors assume that as property values rise, they will eventually sell the property at a profit, allowing them to pay off the loan's principal at that time, while benefiting from the property's appreciation during the interest-only period.

Other types of loans mentioned, such as the buydown loan and graduated payment mortgage, generally focus on providing lower initial payments for homebuyers who might be looking for primary residences rather than investment strategies like those favored by investors. A reverse annuity mortgage is largely designed for retirees seeking to convert the equity in their homes into cash, which is a different target market