Interest Only - Articles & Advice

Short on Cash Get a Mortgage with a Buy Down

A buy down is an alternative financing technique where you make significantly lower payments for the first few years of the loan, and make up the difference with larger payments in the later years of the loan. The initial payments might be interest only or less than interest payments, so you can expect to pay a much larger monthly fee when you actually start working on the principal.

Loan structure
If you get a temporary buy down, the seller might provide the loan with a very low interest rate and no up front fees or points. This will make your loan package extremely cheap. Your monthly payment will be significantly smaller than the actual amount required to pay off the monthly interest and decrease the loan principal.

Then according to the contract the interest rate is increase by a small percentage each year, until your payments level off and cover both monthly interest payments and a reduction in the principal.

By the time the loan is actually paid off, you will have a very large monthly bill because all of the fees and points that you didn’t pay up front were rolled over into the loan. You didn’t skip anything you just decided to pay it all later.

Who gets buy downs?
Buys downs are perfect for the upwardly mobile. That is singles or couples who are purchasing their first home, but expect a rapid or substantial increase in their income within a couple of years.

Unlike a fixed rate mortgage your payments will be steadily increasing over the years. In addition, unlike an adjustable rate mortgage, you will find yourself paying way over market rate for the last few years of the loan.

These types of loans are usually setup as 15-year of 30-year deals. The big advantage of course is that you can get a lot of house for very little money up front. However, the seller or lender will reap a much higher rate of return on your loan than he or she should get on a fixed rate or regular adjustable rate mortgage.

It’s a great deal in the beginning, but make sure you will have the income later on to cover the large payments plus your other household expenses.

This article may be freely distributed as long as there's an active link to http://www.rapidlingo.com Syd Johnson Editor

Related Pages

Home Improvement Loans - Save big with home improvement loans that are tax deductible - Use an equity loan, line of credit, or a cash-out refinancing.

Mortgage Brokers - Shop these top lenders for comparison quotes.

Credit History and Approval - How to get a free credit report - Quick fixes to qualify for a better rate.

Down Payment Leverage - Avoid PMI with a two-loan strategy. How to grow your equity faster.

Online Lenders - Tips on evaluating online lenders and their offerings.

Refinance- Tips on when refinancing is the right decision - How to avoid paying points and other lender fees.

Home Loan Online - Discover the best ways to get the lowest rates - Links for checking current rates.

Real Estate Settlement Procedures - Your rights under the Real Estate Settlement Procedures Act - What protections you are entitled to and what needs to be disclosed to you.

Private Mortgage Loans - When to use private mortgage loans as an alternative funding resource - Qualifying for a private mortgage loan is based on the property value, not your personal credit.

In The News

	Web Home-Loans-Help.com