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Downside to 100% financing?

Established Contributor

Re: Downside to 100% financing?

I have been offered 100% financing as well and wonder the upside and downside to it.
Additionally, I have heard I will only be offered older homes, is that true?
CS 728- 01/13 from 554-12/11
Goal: 800
Message 31 of 34
JGC
New Visitor

Re: Downside to 100% financing?

Problem with 100% financing is that most your monthly payments end up going towards the interest. Get an amortization chart and you will see the payment amount and how much of it is going to principal and interest of your loan. I am financing 100% of my loan b/c we don't have a choice, biut on the upside, we are planning to stay, this is our dream home. We have thought ahead and planned, in case one of us were to get sick or die. Our note is small enough for either one is to pay without the other person and we have life insurance, as well.
Message 32 of 34
Highlighted
Valued Contributor

Re: Downside to 100% financing?


Lasardo wrote:
I have been offered 100% financing as well and wonder the upside and downside to it.
Additionally, I have heard I will only be offered older homes, is that true?

Lasardo,

 

I would find another lender. That is absurd.

 

 

Scores: about 700 across the board
Total CL: $275k
Message 33 of 34
Established Member

Re: Downside to 100% financing?


JGC wrote:
Problem with 100% financing is that most your monthly payments end up going towards the interest. Get an amortization chart and you will see the payment amount and how much of it is going to principal and interest of your loan. I am financing 100% of my loan b/c we don't have a choice, biut on the upside, we are planning to stay, this is our dream home. We have thought ahead and planned, in case one of us were to get sick or die. Our note is small enough for either one is to pay without the other person and we have life insurance, as well.

How much of your mortgage payment is going toward interest is due to the term of the loan not the amount being financed.  You could put 99% down.  If it is a 30 year loan, the majority of your payment will be going toward interest for the first 15 years or so.  With a 15 year it starts at about 50/50, within about 2 years more of the payment will be going toward principal than interest. 

So ideally, if you want to save on interest payments, only finance an amount that will allow you to afford the higher mortgage payment that you would have with a 15 year mortgage.  This can be accomplished by making large downpayment, or by buying a cheaper house.

Message 34 of 34