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Affordable Mortgage Financing For Condo and Home Purchase

With the condo market appearing to slow, one way to stimulate activity is to have affordable mortgage financing available to prospective buyers.

The purpose of this article is not so much to “pitch” option arm financing (even though I believe in it wholeheartedly). The intent here is to bring to light an alternative product which, if fully understood can serve as the vehicle to reach a property which otherwise would not be an alternative.

Take a moment to read the upside payment benefits; then, if interested I have available a detailed description of this complex product.

Recently there has been a good deal of contact from buyers who wish to purchase condo properties in Miami in the $200,000 price range.  Unfortunately spending $200,000 in most cases will not produce a property which meets even the most basic standards of a select group of otherwise buyers.

I submit to you if a prospective buyer would entertain the idea of looking to hybrid financing opportunities they may very well elect to purchase a home or condo which may have been considered too expensive.

The important part of “hybrids” are not only what are their benefits; but, what are the downside risk factors involved.

The Benifits

Let’s discuss a product which if understood is a viable solution for buyers to obtain the property of their dreams.  This product is a short term Option Arm Mortgage.  When I say “short term” don’t confuse it with high payment. “Short Term for the moment, means lowest interest rate.  (The current start rate on a one month option arm is 1.75%)

If a buyer was considering to purchase a $350,000 Miami condo and were to select a one month Option Arm Mortgage, and put $25,000 down, the monthly mortgage payment would be $1156.

A $200,000 condo mortgage payment would be just $710 per month.

Do the math.  Option Arms are a solution to a problem which most buyers face.  Most buyers want luxury and they want it with an affordable monthly mortgage payment.

Don’t fail to investigage mortgage financing which might make the vacation or retirement condo you really want an affordable investment.

The Risks

The risks are that a negative amortization could occur.  That means that if a borrower chooses only to make minimum payments for an extended period of time, they encounter the possibility that they will owe more at the end of year two or three than they did at year one. 

Another risk (although slight) is that interest rates soar, and even though the minimum payment stays small, the amount of negative amortization is dramatic.  (The lender hedges this risk potential by requiring the borrower to “re-cast” the mortgage should they owe 25% or more than the original mortgage amount at any point in time).

The Option Arm product does not match up in each and every scenario; however, in many cases this and other worthy offerings help make mortgage payments affordable to purchase your home or condo

By Jim Jump To Comments
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1 Responses to "Affordable Mortgage Financing For Condo and Home Purchase"

    Condo says:

    Home-Equity Lines of Credit…Many lenders will encourage you to take out a home-equity line of credit on your primary residence to fund all or part of your second home purchase. With interest rates low, this option is certainly worth considering.However, keep in mind that most home-equity lines of credit float a point or two higher than the prime rate, so you could end up repaying this piece at a much higher interest rate than if you had simply taken a mortgage for the entire amount. Plus, unlike mortgage interest, which is deductible on up to $1 million of debt on your first and second homes combined, the home-equity cap is $100,000. (You get a break on $1.1 million total.One trap to avoid is starting with a home-equity loan with the intention of taking out a mortgage at a later date. There is a little-known IRS rule that states that you have just 90 days from purchase to secure a mortgage against a principal or vacation residence. Once you pass that 90-day mark, you can’t deduct the mortgage interest at all.


    Posted on 01/17 at 3:48 AM

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