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Making Change

MORTGAGE MADNESS

Beatrice Bork is a freelance graphic designer and fine artist who's decided she's ready to become a first-time homeowner. Her big concern, however, is how to amass enough cash for a down payment while setting aside some money as a prudent safety net. Bork is looking for a starter home, and would like to spend about $170,000.

Earlier in the year, her accountant advised her to make a 25 percent down payment, and take a mortgage on the rest. In preparation, she saved up the 25 percent down payment, and started feeling the itch to go home shopping. Still, Bork wanted to be sure her strategy was wise before making such a big purchase, so she sent an email to THAT MONEY SHOW, and we hooked her up with Marlene Cintron of Merrill Lynch for a bit of sound advice.

After a consultation, Cintron felt that Bork didn't have to use all her savings on the down payment. Rather, she advised her to put 20 percent down, and sign a 30 year, fixed mortgage for the balance. Since Bork had the full 25 percent saved, the new plan would leave her with a surplus of 5 percent of her home's cost, or $9000. According to Cintron, that safety net should be invested outside the home, in a money market fund, for example, leaving it available in case of emergencies.



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