Q. My daughter will be attending law school in another state in the fall. I am considering the purchase of a condo for her while in school. I need the lowest payment possible. What type of mortgage do you suggest?
A. If you are looking for the lowest payments possible, an interest-only mortgage is the ticket because, as the name implies, you only have to pay the interest portion of the payment.
For instance, if you bought a $100,000 condo at 6%, the regular monthly payment would be $599, but the interest portion of that would only be $500, saving you almost $100 a month.
But before you jump into a condo purchase, please use our rent vs. buy calculator to see how long you'd have to own the condo to at least break even.
For many parents, at many schools, it takes more than three years to get your money back once you consider closing costs, association fees and other expenses.
Buying a condo for a college student made more financial sense several years ago when residential real estate prices were soaring.
But we are looking at very modest appreciation in many parts of the country over the next few years, and declining home values in some cities -- especially for condos.
That makes it critically important for you to check the real estate market where your daughter is going to school.
If she's moving to a city like Miami where thousands of investor-owned condos are for sale and prices are soft, why not just rent one for her?
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