High interest rates. High home prices. High rent.
I get it.
Buying a home right now can feel overwhelming—especially if you already feel like your income is stretched thin. I can empathize. That’s why, as I promised in my last email, I put together a list of my favorite strategies for dramatically lowering your monthly mortgage payment when buying your first, second, or even third home.
Not every strategy will be right for every person. But before you assume homeownership is out of reach, I’d invite you to consider some of the options below—and maybe a few others we can brainstorm together.
1. Utilize Seller Financing & Wrap-Around Mortgages
I put this one first on purpose.
In my opinion, this is one of the best and most overlooked ways to secure a significantly lower interest rate—and therefore a much lower monthly payment and total interest cost.
I wish more people talked about it.
As you’ll see from the graphs attached to this email, despite recent rate increases, the vast majority of homeowners in the U.S. are still sitting on mortgage rates around 3.75% or less.
Many sellers are willing to offer financing with terms that are much more favorable than what banks are offering right now. Depending on the seller’s goals, it can be a win-win for everyone involved.
My take: If I could get more buyers to understand one strategy right now, it would probably be this one.
And no—it doesn’t have to be as scary or risky as some people make it sound. Use a good agent and a good title company to help protect your interests and structure things properly.
2. House Hack or Rent Out a Portion of the Property
If you’re willing to be a little scrappy for a few years before swimming in all your financial bliss, this can be a YYYUUUGE wealth-building strategy.
Because I don’t make truck loads of dollars like some of you, I’ve had to get creative.
My Most Extreme House Hack: Back in 2017, when I bought my first home, I built and lived in an 8×12 Tuff Shed for a couple of years so I could maximize rental income from the house.
My total living expenses—including everything—were about $2,600 per YEAR.
I’m not saying you need to go live in a shed.
I’m just saying there are often more options than people realize.
What We’re Doing Today: Right now, my family is living upstairs in a 3-bedroom, 2-bath home while renting out the downstairs unit that I recently remodeled.
Between owning two homes and living in one of them, I’m currently paying about $1,100 per month in mortgage payments.
That’s significantly less than what many people pay in rent.
Ways to House Hack:
Look for:
* Walk-out basements
* Space to add a kitchenette
* Detached garages that can be converted into rental units
* Properties with ADU potential
In many cases, these improvements can:
* Add substantial equity to your property
* Create additional cash flow
* Cut your effective housing cost dramatically
Extra Wealth-Building Hack:
After 12 months, consider moving out and either:
* Keeping the property as a rental, or
* Selling it after adding value
Then repeat the process.
If you’re interested in this strategy, let’s make sure we find the right property, zoning, and setup from the beginning. Keeping everything legal and properly permitted usually saves a lot of headaches later.
3. Consider New Construction
Builders are competing hard for buyers right now.
To move inventory, many are offering major incentives through preferred lenders and financing programs.
Some builders are discounting home prices.
Others are subsidizing interest rates.
In many cases, builders negotiate wholesale lending arrangements because they’re sending so much business to a particular lender.
Companies like DR Horton and Edge homes among others are offering significant incentives right now, and some builders are reducing prices as well. -I’ve got a network inside along with details they don’t want to advertise. It’s like going to a new car lot- give me a call before going to look and I’ll give you the nitty gritty on how to get the best deal without being flanked.
It’s absolutely worth exploring before assuming resale homes are your best option.
4. Use a 2-1 or 1-0 Buydown
This is another strategy that can dramatically reduce your monthly payment during the first few years of ownership.
2-1 Buydown – Your interest rate is reduced:
* 2% lower during Year 1
* 1% lower during Year 2
* Returns to the original rate in Year 3
1-0 Buydown – Your interest rate is:
* 1% lower during Year 1
* Returns to the original rate afterward
On a $500,000 home, this can save roughly $300-$800 per month depending on loan structure and down payment.
That extra breathing room can make a huge difference while you’re getting established, increasing income, or waiting for rates to improve.
Important: These buy-downs generally make the most sense when they’re paid for by the seller—not by you.
And if rates fall and you refinance before the buydown period ends, the remaining funds may be available to help with that refinance.
5. Buy Down Your Own Interest Rate
If you’re less optimistic about rates dropping—or you’d simply rather lock in a lower payment for the long term—you can permanently buy down your mortgage rate.
Lenders call these “points.”
You pay money upfront in exchange for a lower interest rate over the life of the loan.
A couple quick notes:
* Don’t be fooled by billboard mortgage rates. They’re often assuming you’ve purchased points.
* Always calculate your break-even point.
If you only plan to own the property for a few years, buying points may not make financial sense.
. . .
Onto the next 5, stay tuned!