If you're thinking about moving out of a home you own, why not consider renting…
When you’re ready to finance your new home, you have more options than you probably think you do! We have a list of clever financing tips for you, so kick back and take notes!
Leverage Your Retirement Fund
Talk to your financial advisor about borrowing from your retirement fund. You may be allowed to borrow up to 50% of your 401K plan if you use it to buy a home. First-time home buyers may qualify to take up to $10K from an IRA with no early withdrawal penalty. Check your plan. Some will allow you to borrow and you can find the details in your retirement paperwork or from your benefits advisor.
Home Financing Tip: Borrow From Yourself!
An interest-only mortgage allows you to pay only the interest on the mortgage for a set term of time. This option is good for investors, but it’s also an option if you don’t plan on staying in the home long or if you would like to bank some money for future use.
Home Financing Tip: If saving money is a goal or if you’re planning on selling the home soon, talk to a lender about an interest-only loan.
If your credit is lacking in any way, consider a co-borrower. If your parents have great credit, ask them to co-sign the mortgage with you. This is an idea that is gaining popularity. Of course, mom and dad have to have good credit and you have to pay the loan or else they will be responsible for the payment.
Home Financing Tip: Ask Mom & Dad for help!
Re-Fi Your ARM
Call your bank and ask for a re-fi on your adjustable rate mortgage. ARM’s start out with a smaller interest rate, and then after 1, 3, 5, 7, or 10 years, the interest rate goes up. That lower interest rate to start might have helped get into a home that you might otherwise not have afforded. You need to pay attention to your terms because the increased rate could put you into a much larger monthly mortgage payment.
Some banks are proactively contacting customers with ARM’s and suggesting a re-finance of their loan to put them into a fixed rate. Banks know that they stand a chance of losing the loan or worse, foreclosing on a house if a homeowner can’t make the new mortgage payment.
Home Financing Tip: Save money! If your mortgage is an ARM, call your lender and ask about refinancing.
The Bottom Line
You have many options when it’s time to finance your new home. Sit down with a pad of paper and write out all your income sources and assets. You may have found money hiding right within your own circle of family and friends!