Are you working with a mortgage broker on an interest only home loan? Do you know which situations this loan is actually good for and which it is not good for? There is only one situation that you should ever consider this type of loan and you are about to discover it in this article.
First, the situations that you should never take out an interest only home loan in. If you have good income, have been working for the same company for 2 years or longer, and plan to live in your home for over 3 years, then you should avoid an interest only loan like it is the plague.
Another situation is when you are buying your first home and you plan to stay in it for 3 years or more. They might try to get you to do an interest only loan to keep your payment down, but this does you absolutely no good because you will never build equity and you will lose money on your own home.
So which situation is good for an interest only home loan?
There is only one situation that you should even think about an interest only home loan in. This is if you plan to stay in the home for less than 18 months. This is a very temporary situation and you would not build up much equity in 18 months anyway so you can afford to pay just the interest on the home.
This is usually a loan that is used for people that buy low, fix the home up, and sell high. They are only keeping the home for a short while so an interest only home loan works well for them.
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