Non-Front Loaded Interest Loans?

3 Replies

Hey all,

I am recently out of college, and finally have a decent paying job. I want to eventually work my way into landlording, but at the current time I simply don't have the cash to put a large enough downpayment onto a decent duplex/triplex to make it profitable. Further I don't realistically have the cash flow to guarantee I can afford a duplex/triplex in my area if a renter leaves (I plan on living on one side).

However, I do have the means to buy a personal starter home in the $100,000-$150,000 range, and think it'd be a great way to build equity, which I could then put towards a multi-family home. 

So, my question is this: Are there any types of home financing options out there that don't front load interest payments? 

My reason for asking is that I know with most home financing loans you're really just paying off more of the interest in the first ~5 years; obviously limiting the equity I can build. I'm new to my current job. I'll probably have new/better job opportunities in the future, very possibly in a different city. Even if I don't, I want to get into landlordship sooner than 5 years from now, and would like to build as much equity as I can in the present.

Bottom line: is buying really better than me renting, given that I may not be in the area for 5 years? My hunch is yes, but who knows; the market could crash and I'd be SOL.

Any advice is greatly appreciated.

Thank you for your time,

Brent L 

In terms of existing loans, I have never heard of one. What you can do is buy a cheaper home and put more money towards principle. But realistically you really have to take a look at how muhc "return" you would get by putting extra towards  a mortgage instead of just saving in a CD of some sort.

There are websites you can use to calculate an amortization schedule for a loan which you will see how much you would owe after 5 years of owning. Then compare the equity you built in those 5 years vs simply renting a cheap place and saving the difference every month. If you can rent for a decent amount less than a mortgage. That might make more sense than paying the bank all of that interest.

Another thing to consider is buying a cheaper home that needs some TLC that you could do in the 5 years you live there. If you put 5 years of sweat equity in a property you could be building even more equity by increasing the sales price 5 years down the road. Just make sure you don't over estimate what you can actually do yourself and buy a money pit.

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ALL loans will work that way, since your interest payment in any given month is directly related to the outstanding principle balance, at that moment.