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Some lenders allow you to take out an interest-only mortgage which means that your monthly payments only cover the interest that accrues (check here). In the example above, if you borrowed \$100,000 at 5% and paid \$25,000 annually, you’d only owe \$80,000. This is good for someone who wants to pay for home education, but many borrowers are in this situation because they are new to the housing market. The interest-only interest is calculated for 12 months (not 12-36 months), and you will get a \$0.25 payment per \$1,000 you borrow. This is similar to the interest rate for conventional mortgages, but the payment amount is much higher (up to 15% above the cost of borrowing).

However, if you borrow \$100,000 and pay an annual \$25,000, you would then owe \$109,000, but with no interest. Interest-only loans aren’t always that low, but they are affordable when compared to conventional mortgages. Loan to Value Ratio

A Loan-to-Value Ratio (LTV) is the amount of debt to a specific home value. LTV is calculated by multiplying the cost of the property by the number of days the property is owned by the buyer. For example, a \$300,000 home has a \$50,000 LTV and a 10-day period to own the property. If you are buying a home for a family of three, the LTV of the property would be \$250,000 (10 x \$50,000). In this example, the lender would give you \$75,000 up front, but the remaining \$35,000 would be compounded each month for 18 months.

A Loan-to-Value Ratio (LTV) is the amount of debt to a specific home value. LTV is calculated by multiplying the cost of the property by the number of days the property is owned by the buyer. For example, a \$300,000 home has a \$50,000 LTV and a 10-day period to own the property. If you are buying a home for a family of three, the LTV of the property would be \$250,000 (10 x \$50,000). In this example, the lender would give you \$75,000 up front, but the remaining \$35,000 would be compounded each month for 18 months. The LTV calculation is an important consideration for the investor because a low LTV will result in a higher interest rate.

Taxes. There are numerous tax deductions that can be claimed by an investor. Since a property is sold for its face value, taxes will also be calculated. To see how a property tax calculation works, see the article on Tax Implications of a REIT Investment in Real Estate.