- 1). Determine the principal amount of the loan you need and calculate how much you can afford to pay each month on the interest. If you decide on an interest-free mortgage, you will likely qualify for a larger home. Consider the total monthly expenses of your new home. Higher utilities and higher taxes go hand in hand with a larger home.
- 2). Assess your income. Are you primarily paid with bonuses and other incentives? If so, an interest-free loan may be your best option. Interest-free loans can be flexible and lenders usually allow you to pay down up to 20 percent of your principle balance within a 12-month time frame.
- 3). Appraise your assets. Qualifying for interest-free loans requires less income and offers greater purchasing power than other loans. The principle amount will still be based on the appraised value of your new home and on your income.
- 4). Shop around for a banker or mortgage broker offering the best interest-free loans. Fees will vary and should be a consideration, but you should focus primarily on the type of interest, fixed or adjustable and on the length of the interest-free term as well as any prepayment penalties.
- 5). Learn the basics of adjustable versus fixed rate mortgages so you know what you're getting into. Interest-free loans do not include any payment on the principle, so at the end of the term, you still owe the same amount that you initially borrowed. If you chose an adjustable rate for the duration of the term, your interest payments may be higher than a standard fixed, 30-year mortgage.
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