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.
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