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In an interest only mortgage loan you have an interest only payment option attached to it in the contract note. You only pay the interest on the mortgage that is stated in the note for a fixed period of time.
For example, if you have taken an interest only mortgage loan for 5 years you only pay the interest on your mortgage for 5 years. After the completion of 5 years the unpaid balance is fully amortized over the rest of the period by paying the interest and the principal to the loan company. It then turns into a regular long-term mortgage loan where you have to pay the interest and the principal amount. The interest only mortgage rate is an adjustable rate determined by the current interest rate.
Interest only mortgage payment does not mean negative amortization
Loan programs that have interest only mortgage rates are ones where you pay a fixed rate of interest for a fixed period of time. They do not contain any features of negative amortization, as there is no deferred interest during that fixed period. Option Arm and Cash Flow loan programs are two examples of home loans that carry negative amortization.
Interest only mortgage payment loans are generally not long term solutions
Typically interest only mortgage loans are short-term loans unless your risk profile is high. But these loans carrying interest only mortgage rates are a good opportunity for many wanting to buy homes. For instance:
Individuals in high-income brackets - For consumers who want to invest their money in the market and not lock it by purchasing property. They expect better returns from the markets than the returns on the property.
Young professionals
Youngsters, who may have lower income at present but expect substantial increase in their income in the future, would like to use their purchasing power by getting a home loan with interest only mortgage rate. For example, lawyers, architects, doctors, etc.
Short-term home owners
Consumers who take short term loans are more concerned with payments than equity since they know that they can pay off the loan within a short period of time. This pofile prefers to go for a loan that has interest only mortgage rate.
Investors in property
Consumers who take these interest only mortgage loans invest in real estate when they know that the capital appreciation in property is going to be faster than other investments.
An interest only mortgage loan can be taken by anybody, but it may be more beneficial to a certain profile of customers. If an interest only loan suits your needs discuss all the pros and cons with our financial consultant.
Interest only loans for a fixed period of time
In an interest only loan your interest only mortgage payment is the same for a fixed period of time. It could be a 1,3,5,7 or 10 year interest only mortgage loan. For example: If you take a 5-year interest only mortgage loan, the interest only mortgage payments are made for the first 5 years only, after which your interest only mortgage payments will consist of the principal and the interest.
How to find the best interest only loans
Finding the best interest only can save you thousands of dollars. I recommend you to contact us and we will do all the legwork for you.
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