A mirror mortgage is a specialised mortgage loan used to fund the purchase of investment properties with secure long-term leases.
The major difference between a 'normal' mortgage and a mirror mortgage is that there is a balance between the income and debt servicing outflows for the life of the mortgage. This often involves capitising interest as the rental income generated does not cover the interest expense. As the rent goes up according to the long-term lease so does the repayments. Therefore the mortgage is 'mirrored'; e.g., an investor borrows $500,000 @ 6 percent annual interest only to purchase a property. S/he will pay $2,500 per month interest. If the rent is only $2,000 per month the other $500 per month will be added to the total debt.
Famous quotes containing the words mirror and/or mortgage:
“A novel is a mirror carried along a high road. At one moment it reflects to your vision the azure skies at another the mire of the puddles at your feet. And the man who carries this mirror in his pack will be accused by you of being immoral! His mirror shews [sic] the mire, and you blame the mirror! Rather blame that high road upon which the puddle lies, still more the inspector of roads who allows the water to gather and the puddle to form.”
—Stendhal [Marie Henri Beyle] (1783–1842)
“Loosened from the minor’s tether;
Free to mortgage or to sell,
Wild as wind, and light as feather
Bid the slaves of thrift farewell.”
—Samuel Johnson (1709–1784)