Advantages And Disadvantages of Zero Down Mortgage

There main advantage of a zero down mortgage is the obvious one: you don't have to put any money for the loan. The lender will give you 100% of what is needed to buy a property. As a consequence, you won't have to dispose of your investment or savings money.

The other nice detail is that the monthly payments may cost the same as the rent. So, instead of giving out your money, you are actually buying the property!

Of course, nothing comes free so there are some disadvantages. The lender may ask you to use your securities and actual property as collateral for the loan. The risk of this is that, if you miss one monthly payment, they may execute, without telling you, any security they wish or even your actual home.

Another disadvantage is that securities (like bonds or stock) fluctuate with time. If a lender finds that the securities you have used suddenly have a lower value than the mortgage loan, they will ask you for more securities to cover the deficit.

Interest rate is another disadvantage. Although the lender has find a lot of requirements to assure itself that you can pay, the risk is still higher than other type of mortgage loans. And, if you have chosen an adjustable interest rate, you may find that the high peaks can become quite a burden for your pocket.

After reading this, you may still be wondering if no money down mortgage loans are for you. If you feel that they have too much disadvantages for your taste, then it's because you don't have the financial backup to cover those nasty scenarios. That's why it's very important to read all the fine print in no down payment mortgage loans. It's wise to invest in real estate, but it's wiser to check your cash flow and see if you can pay for it.