No money down mortgages stayed out of the spotlight for a while, but they’re making a comeback in Minnesota. As a matter of fact, the number of financial institutions offering 100% financing is increasing.
Perhaps, this is due to the bright outlook of the American real estate market, which, in spite of bleak predictions by experts year after year, has remained strong.
Everybody knows the risks of taking a mortgage without any down payment: greater chances of sinking underwater, higher interest, and bigger monthly repayments. However, there are also amazing opportunities you can benefit from:
Fast Home Ownership
If you’re planning to buy one of the sought-after Edina, MN homes for sale, you can be its proud owner without losing your cash in hand. The dilemma of many aspiring homeowners is the difficulty of saving money to afford the down payment requirement. For some, it may take years to finally quit renting and start owning.
Mortgages that require no money down makes practically every property you fancy within reach. As long as you have decent credentials, you may begin moving to your new house ASAP without spending that much money out of your pocket.
The downside of putting down some money, especially a large one, is it lowers your rate of return. If your home value increases in a year, you gain equity on it without doing anything, whether or not you pay any down payment. Yes, there’s nothing to expect to grow if you don’t put down anything, but every penny your home value accrues over time is free wealth, in a way.
This benefit is more obvious in an emerging market. This is why you should do your homework when choosing the place to live. After all, a home is more than just a shelter — it’s an investment.
Speaking of investment, you can use your savings instead to invest somewhere else. Rather than converting your cash into equity, buying bonds or stocks can diversify your wealth. As you already have a property you can build equity on over time, putting your eggs in different baskets makes your overall investment portfolio low-risk.
There’s no straight answer to whether 100% financing is good or bad. In the end, you have to weigh both the pros and cons to know if this type of mortgage makes sense for your situation and future plans.