Alternatives to Large Down Payments

The good news and the bad news is that you have many mortgage options available to you. Selecting a mortgage is a major financial decision that an individual or family can make. Many people only shop for the lowest rate on the loan program they think is right for them. The lowest rate on the wrong program is far more costly than a competitive rate on the program that�s best for you.

Rates are important, but you need to also consider taxes, term, fixed or adjustable, rate locks and the loan amount. The size of the loan is the most neglected questions. Some people fear debt, sometimes to a fault and this causes them to shy away from larger mortgages because they don't understand the alternative uses of their money.

A family in the 28% tax bracket actually earns 9.44% on a municipal bond fund paying 6.8%. So at mortgage rates below 9.44%, you should consider taking out the biggest mortgage possible. Other alternatives can be worthwhile. Paying off higher rate or non deductible debt can save a lot of money. People who have chosen more aggressive but riskier approaches have found them to be very profitable.

People use home loan refinancing to save money by lowering their monthly payment. This is good but if the money is spent unwisely and not used for long term, then the investment is not that good. Think about keeping your payments the same but borrowing a higher amount.

A mortgage is typically the largest single financial move people make and should be the centerpiece of any good financial plan. Use it to create wealth for yourself. If you planned to take out a loan of 200k on a home worth 350k, if you make a down payment of 100k, you can invest the extra 50k. At an historic rate of return of 15% annually, that 50k investment would be worth around 400k in 15 years. That�s enough to pay off the mortgage completely in half the time and give yourself a bonus of 215k. A mortgage can be a great financial tool. It should not be obtained the same way you buy a book online. It�s your money.

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