The old adage “there’s more than one way to skin a cat” comes to mind when it comes to mortgages. While most people assume traditional bank mortgages is the only way for them to buy a home, there are actually some financing alternatives when buying a home. Let’s take a look!
Borrowing from Your Life Insurance Policy
One alternative to a traditional mortgage is to borrow from your life insurance policy. A whole life insurance policy accumulates a cash value over time as you make regular premium payments, earn dividends, and even interest. Once this policy reaches a certain amount, you can borrow against the cash value of it without a loan qualification process. Borrowing against your policy will reduce the face value of the policy if it is not paid back. Before borrowing against your whole life insurance policy, there are some things you should ask your insurance company, including
- What is the interest rate?
- Will it reduce the annual dividend?
- Is the withdrawal taxable?
- How will it affect my policy’s death benefits?
- Could my loan eventually cause my policy to lapse?
The answers to these questions will tell you if borrowing the money is really worth it. If you have a whole life policy that you can borrow from, make sure not to lose sight of why you opened the policy in the first place. Remember to pay back the amount back in order to get the benefits of the policy.
With seller financing, you have the benefit of bypassing the bank and make your mortgage payments directly to the seller. Your agreement may include principal amount, interest rate, repayment schedule, consequences of defaults, and other terms that are usually put into a contract. A seller might offer this type of financing if they are having trouble selling the property or if the housing market is extremely weak. This type of financing is not always an option because many sellers do not own the house free and clear. Many sellers are hesitant to do this because of the risk and hassle of becoming a lender. But instead of assuming all of the risks, the seller could arrange for an immediate reselling of the promissory note to an investor who will take over the financing. This financing option will give you more flexibility than traditional mortgages. It will allow you to choose your own terms and work with the seller rather than working with a bank.
These are just two of the most popular mortgage alternatives to buying a home. With these options, you will be in your new home in no time. For more information on finding a home, call Simply Referable today!
Alternatives to Traditional Mortgages with Simply Referable
Together, with your Simply Referable team, you’ll cut the right deal for the right price with qualified guidance every step of the way. Every team member is committed to selling your home and forming a lasting bond with your family. Thanks to our roots in the Maryland/DC region, we can help you find your dream home. Contact us online and give us a call at 410-983-9045. To see some of the stunning homes we work with, follow Simply Referable on Facebook, Twitter, Google+, Pinterest, YouTube, and LinkedIn.