If you have money saved for a down payment it may not be needed. There are several advantages to taking the 100% financing, and saving your down payment. The 100% financing has become increasingly more popular and easier to obtain.
100% financing allows you to move into a home without the stress or difficulty of supplying the down payment. You also will begin to earn equity in your new home.
By using 100% financing, you can keep your money earning interest in your savings account or money market fund. You can also gain a higher tax deduction for interest paid on the loan.
By financing your home with zero money down using 100 percent financing you will be able to hold onto your money instead of tying it up into the equity of your home. This way you will be able to hold onto your money and put it away in a savings account, investment account, or any other type of account to hold onto for a "rainy day". Sometimes, unfortunate events arise and you are required to utilize some of your savings. If this money is tied up in the equity of your home, you may not be able to get it out very easily or you may have very unfavorable terms to access the money. However, if you were to keep this money in your savings account, the money would be accessible instantly. Therefore, always try to make sure that you have some savings put away somewhere and don't tie up every penny you have into the equity of your home.
100 percent financing can be beneficial to any borrower no matter how much money they have in savings. Instead of putting your money towards your home, make an investment that has a higher rate of return than the amount of interest that you are paying on your home, this way you are creating positive cash flow. With 100% financing you gain the same amount of equity if your home appreciates in value as you would by purchasing a home with a 20% down payment
From a purely financial viewpoint, when you purchase a property with 100 per cent financing you are minimizing your financial risk and shifting almost all of the risk to the lender. This concept has become very popular, especially with investors who are always looking to minimize their exposure to risk.
We don’t think that saving for a down payment should be the reason you put your dreams on hold. We can help you buy your dream home with a zero down mortgage loan. You’ll not only be able to afford a home sooner, you’ll probably be able to afford more home. With a zero down mortgage, the amount of loan you can qualify for is determined by your ability to make your monthly payments rather than how large a down payment you’ve saved. And, for most buyers, this means qualifying for a larger loan.
If you plan on using 100% financing, you need to be absolutely certain your new home will hold its value or appreciate.
Even a small decrease in value can leave you "under water", or owning more than your home is worth.
As home prices have risen, so have rents. Often, you can buy a home with 100% financing with a monthly payment that is the same or or only slightly higher than your current rent. When you calculate your income tax savings from your mortgage interest deduction, buying can cost less than renting. In addition, if you get a fixed rate mortgage, your monthly principal and interest payment is locked in for the life of the loan. Your rent, however, will increase 3% to 5% annually based on national averages.
100% financing can help you control more properties and make more in appreciation.
It has become increasingly easier for investors to qualify for 100% financing on the properties they buy. This help an investor leverage their money. The less money they have to use on each property ultimately allows them to buy more properties.
One effective way to get a win-win is to help someone with no down payment money on a For Sale By Owner home. The seller is more likely to agree to seller concessions when they know they are saving the realtor commission.
100% financing is available even on multi million dollar loans if sufficient liquid collateral is available in lieu of a down payment, thereby allowing the purchase of multi million dollar luxury real estate with no money down and no capital gains on liquidation.
The advantages of 100% financing are no downpayment is needed to purchase a home and ability to use more of the equity in your home. Also, buyers do not need to liquidate other investments to purchase a home plus it gives borrowers a greater tax deduction.
An advantage of 100% financing is that you are extremely leverage to the price of housing. Without an investment you can make a substantial amount if home prices increase only a small amount. Also, you can continue to invest your money in other areas and not keep it tied up in the house.