@ Will Wiggins - I believed this deal and terms are from private seller - like Seller/Owner Financing as tradition bank don't do this type of loan.
So, the term is "20% down 4.25% interest 5 year lock 20 year amortization". You have most of them right. Except, at the end of 5-year you have to cash the lender out, period. Either by refinance or sell the property. Again, hopefully during the 5-year period, the tenants help to pay down the principle and the property appreciate which is win-win for you. Typically, you can refinance the property with another lender and pay off the original lender.
Also, this is not ARM (Adjustable Rate Mortgage) - instead it's a fixed rate interest. As if it's an ARM you pay way too much at 4.25% interest :)
Yes, you have to come up with at least 20% for the down payment - the seller needs to see you are serious and have skin in the game. BTW, the 20% down is the norm - you need to have money to make money.
You probably heard from the "gurus" whom pitching their training with no money down , use OPM (Other People Money). Sorry, when you just start out with no experience, etc., like myself, my family not even lend me $100 bucks leave alone convince someone else that you hardly know to invest with you. Maybe, later on, when you have a few properties under your belt.
In short, you might not get away with the 20% down. But, most people often ignore "the key is get the "terms" that favorable to you, the buyer.
Cheers,
