The goal is to save money until an additional 20 percent down payment can be made to purchase another leveraged cash flowing property.
In my previous example, a $100,000 down payment would be required on a $500K home. The mortgage would be based on a $400,000 loan.
At 10% earned interest compounded monthly, the IO loan investing the difference in payments takes 172 months (just over 14 years) to make the down payment.
The principle payment obtains 40% equity in 158 months, 13.16 years.
As long as housing isn’t depreciating, fixed principle payment will compile the necessary down payment faster.
