When you invest in commercial real estate, you have multiple options for financing.  Interest-only loans differ from traditional mortgages in that your monthly payment only consists of interest for the beginning period of your loan. Once the specified time frame is up, you begin paying the full mortgage payment. In many cases, the interest-only payment lasts for two to three years, but there are variations available depending on your circumstances.

According to Iowa's leading Fannie Mae broker, Howell Investment Finance, there are multiple benefits associated with interest-only commercial mortgages. Below, they outline the top three advantages this type of loan offers property investors.   

Fannie Mae Broker Explains 3 Advantages of an Interest-Only Commercial Mortgage Loan

1. Time to Increase Cash Flow

When you first purchase an investment property, there's a lot of money going out but not much coming in. Businesses, including commercial properties, need time to build cash flow so that they can get on their feet. An interest-only loan provides that much-needed space for properties to begin making money and build up a steady flow of cash before the full mortgage begins. The delay associated with this type of loan is one of the reasons they're so popular among Fannie Mae commercial clients.

2. Ability to Buy a Higher-Priced Property

Another benefit of an interest-only loan is that you can feasibly invest in a larger or more expensive property. Since your payments will be smaller in the early stages, a mortgage size that you may not have been able to afford in a traditional set-up suddenly becomes a possibility. Granted, the full mortgage payments will eventually be higher than a smaller property, but more space or a building in a more lucrative area could easily result in a higher profit once your cash flow grows.

3. Spend More in Other Areas

After buying a property, you'll quickly be faced with expenses outside of your mortgage such as landscaping, unit updates, and marketing to attract customers. Not paying a large mortgage payment in the beginning of your loan allows you to spend that money in other areas of your business. Such additional investments in the early stages may result in a bigger return later.

If you're ready to take the leap and invest in a commercial property, contact Howell Investment Finance. The broker specializes in connecting clients with Fannie Mae, Freddie Mac, and HUD financing for their investment property projects. Based in Ames, the team serves multiple communities across the Midwest including Des Moines, Ankeny, and Cedar Rapids. Browse their commercial loan options today by visiting their website, and speak with a loan specialist by calling (515) 233-8228.