What is an Interest Only Mortgage?
Interest Only Mortgage Loans are one of the fastest growing products
in the mortgage industry for home purchases, home refinances
and home equity loans. For a fixed period of time,
borrowers only pay the interest on the loan.
The
payments
that would
have gone to principal is freed up for borrowers to invest
elsewhere. Interest Only Mortgages are attractive to most borrowers
because of
the lower
monthly
payments. Monthly
payments may be lowered even more when selected with an adjustable-rate
mortgage. Since a mortgage loan is amortized, most of the
early mortgage payments typically go towards interest anyway.
How do Interest Only Mortgage Loans work?
At the end of the "interest only" period, the mortgage loan
converts back to the underlying terms and the payments will
include both principal and interest. The monthly payments are
adjusted higher to reflect the fully-amortized payments including
principal. For example, for a 30 year mortgage loan, the amortization
period is 30 years minus the interest-only period. If the interest
only period is 5 years, the maximum amortization period would
be for 25 years. Many borrowers usually chose to refinance at
a lower rate or sell the home once the interest only period
has ended.
Low mortgage interest rates, low housing supply, and more homebuyers,
has driven many areas into a 'seller's market'. The rising
home prices
has forced many buyers to be outbidded or caused homeownership
to be out of reach. Interest Only Mortgage Loans are most popular
in California, New York City, Chicago and Washington DC, where
the home prices have sky-rocketed. Homebuyers may have to
borrow
much more than they did a few years ago. With an Interest Only
Loan, the typical middle-income family can buy a home at an
affordable home mortgage rate. It also gives the homebuyer
the leverage they need to purchase a quality
property
that will build equity through appreciation of the home value.
Interest Only Mortgages may not be for everyone. Understand
the pros and cons of Interest
Only Mortgages before you decide.
Our professional mortgage advisor will work with you to determine
if an Interest Only Loan is right for your specific circumstances.
This is a free service with no obligations. Contact us toll
free at 1-877-939-5400 or have a mortgage
advisor contact you.
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