![]() ![]() When you apply for a mortgage to buy a home, lenders will closely review your finances, asking you to share bank statements, pay stubs, and other documents. land (where about one-third of Americans live) is located within USDA loan–eligible boundaries. While many assume USDA loans are just for farms or extremely remote areas, 97% of U.S. USDA loans:The United States Department of Agriculture offers loans in rural areas to borrowers with low to moderate incomes. In addition to putting no money down, borrowers also get lower interest rates and other fees. military (and qualifying family members) can get loans backed by the U.S. VA loans:Current and former members of the U.S.It’s ideal for first-time home buyers who lack the money for a large down payment. But if you don’t have 20%, you can put down as little as 3.5%, or in some cases 0%.įHA loan:These loans are backed by the Federal Housing Administration, which means you can put down as little as 3.5% of the price of the house. So, if you apply for a standard P+I mortgage the bank will test whether you can pay the loan back over 30 years.īut, if you apply to go interest-only, you will have 5 years’ interest-only repayments and then 25 years of principal and interest.To get the best mortgage interest rates and terms, you’ll want a down payment amounting to 20% of a home’s sale price. So really, the phrase “interest-only mortgage” is a bit of a misnomer because it’s not an interest-only mortgage, it’s an interest-only period. This means, at the end of that 5-year period, your loan will move to principal and interest by default. When you apply for an interest-only mortgage, you’re generally approved for a 30-year principal and interest mortgage with a 5-year interest-only period tacked on the front. An investor can often borrow slightly less than they could if taking out a standard P+I loan. ![]() It’s common for investors to initially think they’ll be able to borrow more on an interest-only mortgage, since their costs are lower. So, if you have one, make that your focus.Ĭan I borrow more if I go on interest-only? The aim of the game is to pay down your debt on your owner-occupier. That creates an incentive to pay back personal debt first. If the interest on your investment mortgage is still tax deductible, then your investment debt has a tax benefit, whereas your owner-occupier mortgage does not. So paying down personal debt frees up useable equity, whereas paying investment debt may not.ģ) It can help you save on tax. This isn’t available for many investment properties, because they are highly leveraged. Most investors borrow against their main home to fund the deposit for an investment property. If worst comes to worst you can always sell your investment property to pay back the mortgage, but you may not want to sell your main home if you get into a tricky financial situation.Ģ) It can help you grow your portfolio more quickly. They’ll then use that money to pay down their own personal debt more aggressively.ġ) It helps to protect your main home. In this case, the borrower will take the money they would have used to pay down their investment mortgage. Similarly, if you have an owner-occupier mortgage, it is generally better to pay this down first rather than paying back debt on your own home and your investment property at the same time. ![]()
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