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July 13, 2005Interest only LoanHome Loan Options in California Now that I have submitted my offer and am playing the waiting game, I need to think about how I am going to finance the home. I have been pre-qualified for the amount I need to purchase the home but haven't decided on a lender or the type of financing. To be honest with you, I don't have a lot of options when it comes to the type of loan. Due to the ridiculous prices in Southern California and the fact that I don't have a small fortune for the downpayment, I need to go with an interest only loan. This goes against everything I have been taught but I don't have a choice if I want to buy a home. Also, the fact that I don't want to pay PMI means that I need a piggyback loan or HELOC which will also be interest only. Now within the interest only loans, I need to decide if I want a 5 or 7 year arm and if I want to pay points. Each point costs 1% of the loan so I am looking at 1 point costing $6,800. I also need to determine if I want the second mortgage tied to prime or fixed. If I choose a fixed loan, the rate increases by a point to 7.5%. This is probably the best option because it only increases my payment by $200 a month and gives me the peace-of-mind that my payments won't increase everytime the Federal Reserve decides to increase short term rates. I am going to take a long hard look at the 5 year arm vs. the 7 year arm tomorrow and whether or not I want to pay down the rate with a point so stay tuned... Posted by Dogger at July 13, 2005 10:55 PM CommentsAn interest only loan is the exact same thing as renting, except that the bank is the landlord and that you get to pay for the water heater when it breaks. Maybe the property will have gone up in value by the time you sell, maybe it's flat, or maybe you're taking a bath. If you can find a rental house for roughly the same price as your potential mortgage, go for that. Less liability when the Chinese finally stop buying US debt and interest rates skyrocket, popping the bubble. Posted by: RJRJRJRJRJRJR at July 25, 2005 11:34 AM Post a comment |
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