Interest Only Mortgages Things You Should Know

Interest Only Mortgages Things You Should Know 1

Interest Only Mortgages - Things you​ Should Know
Interest-Only or​ Interest-First mortgages have been around for quite some time now,​ but have recently been exploding in​ popularity .​
Originally offered primarily in​ the​ non-prime market,​ interest only mortgages are now available as​ conforming loans and can come as​ a​ feature on​ a​ wealth of​ loan programs,​ including adjustable rate mortgages,​ 40 and 50 year term loans,​ stated income loans,​ and to​ borrowers with credit scores as​ low as​ 540.
The first thing you​ should know about an​ interest-only mortgage loan before you​ commit is​ that YOUR PAYMENT WILL CHANGE .​
With an​ interest-only loan,​ your first payments are towards the​ interest,​ not the​ principal .​
After a​ set amount of​ time (traditionally,​ anywhere from two to​ fifteen years),​ the​ lender will require you​ to​ start paying back the​ principal along with your interest payments .​
As long as​ you​ are prepared for this payment adjustment,​ interest-only loans can be an​ extremely useful tool in​ financing,​ especially purchases .​
With a​ lower monthly payment,​ your purchase power increases when shopping for your dream home,​ and you​ can always re-finance down the​ road to​ a​ regular amortizing loan.
There are a​ few caveats to​ be watchful of .​
Some predatory lenders target first time homebuyers by telling them they can afford (on paper) that gorgeous seven bedroom mansion .​
The mortgage they may have in​ mind could have a​ fixed rate for only two years (and then increase 2-3%),​ be interest only for the​ first two to​ five years,​ and have a​ pre-payment penalty that would cost them thousands of​ dollars if​ they want to​ refinance or​ even sell in​ the​ first two to​ five years of​ the​ loan .​
Unable to​ cope with the​ payment shock,​ the​ new homeowners may be forced into a​ very uncomfortable financial position.
Interest-only mortgages are a​ viable for many people .​
Just make sure you​ do your research and understand all facets of​ the​ loan you​ are offered.

Interest Only Mortgages Things You Should Know

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