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Jeff- if you get an 80% loan-to-value (LTV) 1st loan, hopefully it can be as good as is available. Sounds like the second loan is the one that will suffer. Instead of saving up $10,000 per year, just use that to pay down the 2nd and get it out of the way. It's my feeling that long term rates are only going up, and refinancing your 1st later will probably be with less favorable pricing.
In addition to a 0-5% down payment, you'll have your closing costs to come up with in addition to pro-rated interest, taxes, and one year's worth of homeowner's insurance. You can structure the deal so the seller pays your non-recurring closing costs in full, saving you thousands to close the deal. You might also be able to be creative and get some down payment back after close of escrow.
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