Asset based mortgage (7.5% interest rate)

[Skylar Mcgee]

Got pre-approved for an asset based mortgage with a 7.5% interest rate. I’m currently unemployed due to Covid but have inherited a large savings account from a passing family member. I’m sick of throwing my money away on rent and want to buy my first home. Also my lender requires a 25% down payment. I will refinance into another loan with better interest rates when I find a new job.

Is this worth doing? I feel like anything is better than renting and wasting money.

[Tom S.]

@Skylar Mcgee  Keep in mind when you first get a mortgage, 99% of the payment is interest.  So instead of giving rent to a landlord, you're giving interest to the bank.  Of course, over time you'll pay more and more principal, but it really doesn't start to accelerate until 5-7 years in, on a standard 30 year mortgage.

Whether to buy now is your personal decision.  You most likely will get tax benefits from the interest write-offs.  You might get appreciation, but the house also could lose value in these uncertain times. You'll also have to pay another set of closing costs to refi once you have a job.  So you'll have to weigh the pros and cons.

Good luck!