Interest Only Mortgages


Interest Only Mortgages
These days,​ as​ people scramble for new and more creative ways to​ finance buying a​ home,​ the​ interest only mortgage is​ becoming more common and well known .​
An interest only mortgage is​ one in​ which you​ have the​ option of​ paying only the​ interest (or just the​ interest and a​ portion of​ the​ principal) each month in​ the​ early years of​ the​ mortgage loan .​
Interest only periods may be applied to​ adjustable rate mortgages,​ or​ 30 year fixed rate mortgages,​ depending on​ the​ lender .​
In a​ traditional mortgage,​ each month your mortgage payment is​ divided in​ two parts - one part is​ paid on​ the​ interest charge,​ the​ other on​ the​ principal of​ the​ loan .​
The main feature of​ an​ interest only mortgage loan is​ that during a​ specified initial period of​ time - usually three,​ five,​ seven or​ ten years - you​ may choose to​ make a​ payment of​ the​ interest portion of​ the​ loan only .​
The option is​ flexible .​
One month you​ may choose to​ make an​ interest only payment,​ another you​ may choose to​ make an​ interest-plus-part-of-the-principal mortgage payment,​ or​ a​ full,​ standard monthly mortgage payment .​
Needless to​ say,​ an​ interest-only payment will be significantly less than a​ traditional mortgage payment.
The flexibility of​ an​ interest-only mortgage allows you​ to​ adjust your mortgage cost on​ a​ month by month basis,​ giving you​ more control over your monthly cash flow .​
In any given month during the​ interest-only period,​ you​ have the​ flexibility to​ pay as​ much or​ as​ little on​ your mortgage as​ you​ can.
Interest only mortgages aren't right for everyone .​
While you​ have the​ option of​ paying interest only each month during the​ early years,​ the​ principal repayment on​ your mortgage loan is​ accumulating .​
At the​ end of​ your interest only period,​ your mortgage payment will take a​ dramatic jump .​
Financial experts recommend interest only mortgages for specific types of​ borrowers: those whose income is​ supplemented by large commissions or​ bonuses throughout the​ year,​ those who can reasonably expect to​ be making considerably more income in​ a​ few years than they are now,​ and those borrowers who actually WILL invest the​ difference between their interest-only payment and their full mortgage payment in​ profitable investments.
The power of​ an​ interest-only loan,​ according to​ most experts,​ is​ that you​ can 'afford to​ buy more house' .​
Because you'll have the​ choice during the​ early years of​ paying only the​ interest each month,​ you​ can effectively afford the​ monthly payments on​ a​ house that's as​ much as​ 30% more expensive than you​ could with an​ amortizing (typical) mortgage payment.
You also,​ however,​ have the​ choice each month of​ paying the​ interest plus as​ much on​ the​ principal as​ you​ wish .​
If you're a​ salesman,​ for instance,​ whose standard income is​ supplemented quarterly and semi-annually by large commissions or​ bonuses,​ you​ could pay interest-only during lean months,​ saving yourself up to​ $350 in​ those months .​
In the​ months that you​ get a​ large commission though,​ you​ could choose to​ pay down several thousand dollars on​ the​ principal.
An interest only mortgage also makes sense if​ you​ have a​ solid investment plan .​
If a​ typical mortgage payment would be $900 monthly,​ and your interest-only payment for the​ month is​ $625,​ then the​ best financial strategy according to​ many financial experts is​ to​ invest the​ remaining $275 in​ a​ solid,​ money-making stocks program.
Interest only loans are not for everyone,​ but they can be a​ valuable financial tool that can help you​ control your spending and give your investment power some added oomph .​
Don't rush blindly into an​ interest only mortgage,​ but do speak to​ a​ financial expert or​ loan officer about whether an​ interest only loan may be right for you.



Interest Only Mortgages



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