Interest only mortgage loans can be an excellent mortgage refinancing option for homeowners who need the lowest monthly payment possible. There are risks associated with interest only mortgages and these loans are frequently abused so it is important to understand what you’re getting into before taking out an interest only mortgage. Here are several tips to help you decide if interest only mortgage refinancing is right for you.
Interest only mortgage refinancing loans have a monthly payment amount that only covers the interest due in a given month. Because the payment only covers finance charges the principle balance of your loan remains constant. The interest only period only lasts for a fixed period of time, often five years. At the end of the interest only period the lender will convert your mortgage to a standard Adjustable Rate Mortgage fully amortized for the time remaining in your loan contract. This means your payment amount once converted will be significantly higher than if you had used a conventional mortgage loan.
Interest only mortgage loans are a useful tool for homeowners that need the lowest payment possible for a short period of time. If you plan on making fully amortized payments at the end of the interest only period you can eliminate much of the risk associated with interest only mortgage refinancing. No amount of planning can alleviate the risks when these loans are abused. Many homeowners use interest only mortgages to qualify for homes that they would not qualify for with conventional mortgage loans. These homeowners frequently find they are unable to afford the payments when their lenders convert their mortgages at the end of the interest only period.
You can learn more about your interest only mortgage refinancing options, including costly mistakes to avoid with a free, six-part mortgage tutorial.
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Louie Latour specializes in showing homeowners how to avoid costly mortgage mistakes and predatory lenders. To get your hands on this free video tutorial: “Mortgage Refinancing - What You Need to Know, " which teaches strategies for finding the best mortgage and saving thousands of dollars in the process, visit .
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Interest Only Mortgage Refinancing