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Interest-Only Mortgage Loans
by rebuildcreditscores.com
by rebuildcreditscores.com
Benefits of Interest-Only Mortgage Loan:
Risks of Interest-Only Mortgage Loans:
- An interest-only mortgage allows the borrower to pay the lowest possible monthly
payment for a fixed term.
- Short-term borrowers who are not as interested in building equity but would prefer to
have lower payments.
- Business owners with less stable incomes would benefit from interest-only mortgage
loans when some months may be lean on income. Additionally, those months when you
have greater cash flow, you can pay on the principal, if desired.
- Executives who earn a modest salary during the year but whose primary income comes
from bonuses would benefit from an interest only loan.
- If you are a young professional just starting out and expect to earn a higher income in a
few years this may be a good option for you.
- Borrowers who believe it would be more beneficial to invest their income in the stock
market and its returns and not property.
- Investors who believe the property will appreciate would benefit from an interest-only
loan as their fixed term monthly payments will be lower as the property grows in value.
Risks of Interest-Only Mortgage Loans:
- The borrower will not have sufficient income to satisfy the principal and interest once the
interest-only period ends.
- Nothing is paid toward the principal during the interest-only period and you experience
payment shock.
- Payment shock occurs because the overall term of the loan is (30) years and for a fixed
period mortgage, for instance (5) years, you were only paying the interest on the loan.
Now, in order for the lender to amortize your loan and ensure it is repaid in the
remaining period (25) years, your payments are recalculated on a (25) year repayment
schedule using your current balance. Your payment is going to increase tremendously.
- Interest rates rise but your home goes down in value, making it impossible to refinance.
An interest-only mortgage loan allows you to pay only the interest on the mortgage that is
stated in the note for a fixed period of time.That fixed period of time can be 3, 5, 7 or even 10
years.
After the completion of the fixed period of time, the unpaid balance is fully amortized over the
rest of the period by paying the interest and the principal. You can refinance, pay the balance
in a lump sum, or begin paying off the principal. Whatever way you choose, your payment will
increase.
stated in the note for a fixed period of time.That fixed period of time can be 3, 5, 7 or even 10
years.
After the completion of the fixed period of time, the unpaid balance is fully amortized over the
rest of the period by paying the interest and the principal. You can refinance, pay the balance
in a lump sum, or begin paying off the principal. Whatever way you choose, your payment will
increase.
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After the completion of the fixed period
of time, the unpaid balance is fully
amortized over the rest of the period by
paying the interest and the principal.
You can refinance, pay the balance in a
lump sum, or begin paying off the
principal. Whatever way you choose,
your payment will increase.
Interest only loans were once a loan
product for more affluent buyers. Now
interest only loans attract more people
because they allow buyers, as well as
investors to purchase more expensive
homes.
of time, the unpaid balance is fully
amortized over the rest of the period by
paying the interest and the principal.
You can refinance, pay the balance in a
lump sum, or begin paying off the
principal. Whatever way you choose,
your payment will increase.
Interest only loans were once a loan
product for more affluent buyers. Now
interest only loans attract more people
because they allow buyers, as well as
investors to purchase more expensive
homes.
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