Finding An Interest Only Mortgage

Finding An Interest Only Mortgage



Finding An Interest Only Mortgage
An interest only mortgage is​ a​ type of​ mortgage where you​ will pay only the​ interest and does not repay the​ principal amount for a​ period of​ time and during this period; the​ loan balance will remain the​ same.
In twenties this type of​ loan was normal,​ as​ it​ worked fine as​ the​ home did not lose value and the​ borrower does not lose his job,​ but when there was depression in​ thirties that made these loans to​ get into the​ foreclosures,​ and the​ lenders stopped giving this kind of​ loans,​ as​ they wanted the​ loans that are repayable.
Today interest only loans are available for a​ period of​ 5 years only and at​ the​ end of​ the​ period,​ the​ payment is​ collected to​ the​ full amortizing level .​
The longer the​ interest only mortgage the​ larger the​ new payment when the​ term gets over,​ these interest only mortgages are especially for those who wanted to​ make less initial payment and has great confidence that they can make the​ huge amount when the​ mortgage term gets over.
With interest only mortgage the​ monthly payment you​ make gets covered for the​ interest alone but not the​ principal that is​ the​ amount you​ have borrowed ,​ so at​ the​ end of​ the​ mortgage period you​ have to​ make ready the​ entire principal amount ,​ for this you​ may have to​ make arrangement to​ save extra funds in​ the​ investments you​ make,​ so that you​ have sufficient funds to​ repay the​ principal amount at​ the​ end period of​ interest only mortgage term .​
To make up these principal payment at​ the​ end of​ interest only mortgage you​ can invest your amount in​ tax free individual savings account (ISAs) ,​ Tax-efficient pension plan and endowment policies,​ for this you​ need to​ talk to​ your independent finincial advisor who can help you​ to​ find the​ right investment as​ they are experts who advice or​ sell the​ policies offered by insurance companies,​ building socities and the​ banks.
In this interest only mortgage you​ would be paying only the​ interest and the​ principal amount you​ have borowed remains the​ same even after 25 years,​ but during this time your investment should have grown enough to​ pay off your principal amount of​ mortgage .​
Mostly interest only mortgage are offered on​ Adjustable rate mortgage and sometime they are also found on​ fixed rate mortgage .​
This interest only mortgage is​ suitable for those who has regular income and can make small payment regularly but at​ time when they get bonus or​ any sporadic income they can pay back the​ principal with this way the​ borrower can end up his interest only mortgage loan.




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