Making Interest Only Loans Work For You

Chuck Aikens
 


Visitors: 522

If you want to lower your mortgage payment, there is a good chance you will evaluate an Interest Only option on your mortgage loan. An Interest Only option might be a good fit for someone whose income is mostly in the form of infrequent commissions or bonuses or who expects to earn more money in a few years. Business owners with unpredictable incomes might benefit from interest only loans also.

The Interest Only option was originally designed for financially savvy borrowers who will truly invest the savings on the difference between an interest-only mortgage and an amortizing mortgage, and who are confident that the investments will make money. Financial advisers don't recommend interest-only mortgages to regular wage earners who take out moderate-size home loans and don't have a strategy for investing the savings.

With an interest-only mortgage loan, you pay only the interest on the mortgage in monthly payments for a fixed term. After the end of that term, usually ten years, you refinance, or pay the balance in a lump sum, or start paying off the principal, in which case the payments jump skyward.

Let's say you borrowed $250,000 at 6 percent. For the first three years, the savings on an interest-only loan would amount to less than $250 each month. Double the loan amount to $500,000 at 6 percent, and an interest-only loan saves more than $350 in the first month. In addition to the monthly savings, the lower monthly payment also allows borrowers to buy much more house.

The Interest Only option is a good option for individuals who have a future of increased earnings ahead of them who want to buy more house now. Without the interest only, the homeowners may find themselves with continuous “buying up” transactions where real estate and moving costs would otherwise chip away at home equity gains.

Among the risks of an Interest Only option is that the house will lose value or not appreciate as rapidly as the borrower believes. People must remember that the principal must be paid at some point and the Interest Only option will prohibit them from building equity in their home. However, during the past decade, most homeowners have built their equity through appreciation and not by paying down the mortgage.

Understanding that the Interest Only option is not for everyone, you can use this option on most loan programs to minimize your monthly payment, qualify for more home when buying, and gain some financial flexibility for your overall financial goals. For

For more information about Interest Only loans, visit our website to view Current Interest Rates and calculate an Interest Only Payment Option using our online mortgage calculator .

Chuck Aikens
VP, Internet Lending
Greenwood Capital
866-582-0901

(468)

Article Source:


 
Rate this Article: 
 
Are You Making Money Online Through A Personal Interest Of Yours?
Rated 4 / 5
based on 5 votes
ArticleSlash

Related Articles:

Interest Only Home Equity Loans: How do the Loan Terms Work?

by: Nick Rian (July 12, 2006) 
(Finance/Loans)

Payday Loans And Making Them Work For You

by: Rhealurline Sarahasaj (March 21, 2013) 
(Finance/Personal Finance)

Making PayDay Loans Work For You

by: Rosie Leazl (June 27, 2013) 
(Finance/Personal Finance)

Low Interest Mortgage Rates - How To Find The Lowest Interest Rates On Real ..

by: Carrie Reeder (September 08, 2005) 
(Finance/Mortgage Refinance)

Secured Loans Easy, Low Interest Financial Loans For Every Category of Borrower

by: Terry Hendrix (July 12, 2008) 
(Finance/Loans)

Unsecured Consolidation Loans - Get Rid of All the High Interest Loans

by: Jennifer Morva (September 24, 2008) 
(Finance/Unsecured Loans)

Interest Only Home Loans - Are Interest Only Home Loans Worth It?

by: Gressly Stevens (April 08, 2008) 
(Finance/Home Equity Loans)

Fannie Mae and Freddie Mac Mortgage Loans - Conforming Loans Provide Low ..

by: Carrie Reeder (September 15, 2005) 
(Finance/Mortgage Refinance)

Types of Creative Loans Interest Only Loans

by: Dwan Bent-Twyford (November 10, 2008) 
(Finance/Loans)

Are You Making Money Online Through A Personal Interest Of Yours?

by: Paul Jesse (March 12, 2007) 
(Internet and Businesses Online)