How Can I Get A More Expensive House?

Summary

There are many loan options for people who want to get a more expensive property.

Loan Options

There are many new loan options to help you stretch your mortgage dollar.

Where lenders used to require you to pay both the principal and interest each month you now have new loan options.

When a lender allows you to pay and interest only payment or even less, you can afford a higher loan balance.

There are two basic options you have to get a more expensive house: interest only loans and minimum payment option loans.

Interest Only Options

An interest only loan gets you a lower payment than a regular loan. You can use this loan type for several reasons.

You will have payment stability and no negative amortization. This is when a loan balance actually increases over time. This does not happen with an interest only loan. The loan balance remains the same.

There are loans with a 10 year interest only option, although there are now interest only loans for 30 years offered by some lenders.

Minimum Payment Options

A minimum payment option allows you to pay even less than interest only. Any amount paid less than the interest only payment is added onto the principal of the loan. This is known as negative amortization.

For example, if a minimum payment option is $900 and the interest only payment is $1,400 then if you pay only the $900 minimum payment you will add the $500 difference onto your loan principal.

An increasing loan balance is acceptable to some borrowers because they either believe the property value will increase and offset the increase in loan size, or they don’t mind an increasing loan size.

This type of loan allows you to really stretch your dollar. The initial minimum payment period is usually only for the first 5 years. Some borrowers refinance back into the minimum payment loan at the end of those 5 years.