(Whether you already own or you’re buying your first home)
If you’ve been watching rates, you know the real game isn’t just rate—it’s monthly payment. In a market where every dollar counts, the winning move is choosing the financing strategy that delivers the most payment power for your situation.
This guide gives fast, practical plays for:
Homeowners who want to lower payments or tap equity, and
First-time buyers who want to qualify and keep payments manageable.
Commercial and residential borrowers welcome.
How to use this guide
Skim the 9 Payment Plays below and grab the ones that fit your timeline and goals. Each play includes Best for, Why it works, and Watch-outs—so you can move with confidence.
1) Temporary Buydowns (2-1 / 1-0)
Best for: First-time buyers and move-up buyers using seller credits or builder incentives.
Why it works: A 2-1 buydown reduces your rate by 2% in year 1 and 1% in year 2, dropping your payment during the expensive early years.
Watch-outs: Payment steps up; budget for the increase or plan a future refinance.
2) HELOC vs. Cash-Out Refinance (side-by-side)
Best for: Homeowners with equity who need funds for renovations, debt consolidation, or an ADU.
Why it works:
HELOC = flexible, interest-only access to cash without touching your first mortgage.
Cash-Out Refi = one new loan that can simplify your total payment if consolidating debt.
Watch-outs: HELOCs are typically variable; cash-out refis may reset your term.
3) Interest-Only Loans
Best for: High earners with variable income (bonuses/commissions), investors, and self-employed borrowers focused on cash flow now.
Why it works: You pay interest during the initial period, keeping payments lower while you build reserves or ramp up your income.
Watch-outs: Principal isn’t reduced during the IO period; plan for the step-up when amortization begins.
4) Bank-Statement & 1099 Loans (Self-Employed)
Best for: Entrepreneurs, contractors, and gig-economy pros whose tax returns don’t reflect true cash flow.
Why it works: Qualify using 12–24 months of deposits or 1099s instead of W-2s.
Watch-outs: Rates and down payments can differ from conventional; consistent deposits help.
5) DSCR Loans (for investors & house-hackers)
Best for: Buyers focused on rental income—single units, small multis, or an ADU.
Why it works: Approval is based on the property’s Debt Service Coverage Ratio (DSCR): Rent ÷ PITI. If income covers the payment, you may qualify without traditional income docs.
Watch-outs: DSCR guidelines vary; reserves and down payment requirements apply.
6) The ADU Strategy (Accessory Dwelling Unit)
Best for: Owners who want to offset their mortgage with long-term rental income or support multigenerational living.
Why it works: Finance with a HELOC, cash-out, or renovation loan, then use the ADU rent to reduce net housing cost.
Watch-outs: Check local zoning/permits and plan for construction timelines.
7) PMI Tactics (for low-down buyers)
Best for: Buyers putting less than 20% down or owners who’ve built equity.
Why it works: You can remove PMI once you hit certain LTV thresholds—sometimes with a new appraisal.
Watch-outs: Don’t assume PMI is forever; set reminders at 80% or 78% LTV.
8) Mortgage Recast vs. Full Refinance
Best for: Owners who receive a lump sum (bonus, sale proceeds) and want a lower payment without changing the rate.
Why it works: A recast re-amortizes your existing loan after a large principal payment—no new rate, minimal cost.
Watch-outs: Not all loans allow recasts; call your servicer first.
9) Assumable Loans & Smart ARM Choices
Best for: Buyers of homes with FHA/VA loans at lower legacy rates, or buyers expecting income/rate relief in the next 5–7 years.
Why it works: Assumption lets you take over the seller’s existing rate/terms. Modern ARMs can offer meaningful upfront savings.
Watch-outs: Assumptions require servicer approval and may require additional funds for the seller’s equity.
Quick Compare: HELOC vs. Cash-Out vs. Interest-Only
Feature HELOC Cash-Out Refi Interest-Only
Access Equity Yes (line of credit) Yes (new first mortgage) N/A (purchase/refi product)
Touches Current Rate? No Yes Yes (new loan)
Typical Payment Interest-only during draw Fully amortizing Interest-only during IO period
Rate Type Usually variable Fixed or ARM Fixed or ARM
Best When You want flexibility You’re consolidating debts You need cash-flow relief now
Watch-outs Rate can adjust Resets term/closing costs Plan for payment step-up
Two One-Page Roadmaps
If You’re a Homeowner
Need cash quickly? → Start with a HELOC.
Juggling high-interest debt? → Compare cash-out refi vs. HELOC (consolidation vs. flexibility).
Payment relief needed? → Consider interest-only or a recast (if eligible).
Want long-term savings? → Refinance when breakeven (closing costs ÷ monthly savings) is within your time-in-home.
Create income? → ADU plan: budget, permits, rent estimate, then finance.
If You’re a First-Time Buyer
Payment is the hurdle? → Use a temporary buydown + seller credits; compare ARM vs. fixed.
Is income proof tricky? → Explore bank-statement/1099 options.
Offset payments with income? → Consider house-hacking via DSCR or an ADU-ready property.
Low down payment? → Pick programs with manageable PMI and set removal milestones.
State Tips: CA • TX • FL • GA
California (CA)
Strong interest in ADUs: highlight ADU financing + rent-offset scenarios.
Refi/PMI removal is often driven by appreciation—ask about re-appraisal.
Local permitting matters—factor in timelines when budgeting.
Texas (TX)
Texas has unique homestead equity rules (cash-out/HELOC).
Emphasize cash-out vs HELOC decisioning with conservative LTV examples.
Watch property-tax impacts on escrow/PITI.
Florida (FL)
Insurance is a significant driver—model total PITI with insurance and wind-mitigation credits.
Condos: note reserve/budget requirements.
ADU/garage conversions vary by city; check zoning regulations first.
Georgia (GA)
Atlanta metro: Pair buydowns with seller credits to keep payments in check.
Investors: DSCR messaging resonates—quick test: Rent ÷ PITI ≥ 1.0–1.2.
Compare taxes/HOA across neighborhoods in your PITI.
Mini Checklists (save these)
HELOC vs. Cash-Out Break-Even
How much do you need?
Lump sum or staged draws?
Compare total interest over 24–36 months.
Consolidating debt? A cash-out refinance may simplify and fix the rate.
Buydown Snapshot
Year-1 vs. standard payment
Year-2 vs. standard payment
Who funds the credits? (seller/builder/lender)
Refi plan if rates improve
DSCR Quick Test
Estimated monthly rent: ______
Estimated PITI: ______
DSCR = Rent ÷ PITI → If ≥ 1.0–1.2, you may be close
FAQ
Is interest-only “risky”?
It’s a cash-flow tool. Payments are lower up front; later they step up when principal repayment begins. It can be a fit for variable income or short holding periods—if you plan for the step-up.
Can ADU income help me qualify?
Often, yes—guidelines vary. Some programs allow market rent to be considered. We’ll show what counts for your scenario.
How fast can I remove PMI?
If your LTV reaches 80% (via payments, appreciation, or improvements), request removal or an appraisal review. At 78%, many loans drop PMI automatically per schedule.
Get your custom 3-Option Payment Plan.
In 24 hours, we’ll compare your best HELOC, Purchase/Refi, and (if applicable) Interest-Only or DSCR paths—side by side with projected monthly payments.
Pick your path:
Homeowners: Compare HELOC, Cash-Out, and Recast options.
Self-Employed: Bank-Statement/1099 pre-check available.
ADU Curious? Request a free rent-offset estimate.
Subject to credit approval. Not a commitment to lend. Programs, rates, and terms are subject to change. Licensed in CA, TX, FL & GA. CalDRE #01928649 • NMLS #1339357. Equal Housing Lender.