IS AN "INTEREST ONLY MORTGAGE" RIGHT FOR YOU?
Wednesday, July 11, 2007
April 2007
The comments below are based on information found on the Financial Trends Forecast website.
Is an "Interest Only Mortgage" right for you?
If you have the option of paying only the interest every month on your loan it is called an interest-only loan. This type of loan allows you to pay on the principal balance only when you want to or when it is convenient for you.
Most interest-only loans or mortgages limit the option to pay the interest only for a specific amount of time. Usually from 5 to 10 years. The remaining principal balance comes due at the end of that term.
Interest-only mortgages may be a good choice for certain borrowers like those whose incomes fluctuate from month to month. However, this feature of Interest-only loans and mortgages can be either a benefit or a pitfall for borrowers. You must be disciplined enough to pay the principal even though you are not required to do so.
… Some people that may benefit from such a loan are, borrowers who expect their income to increase during the term of the loan, first time home buyers if they expect to upgrade their starter home to a bigger home soon, etc…
Most interest-only loans or mortgages limit the option to pay the interest only for a specific amount of time. Usually from 5 to 10 years. The remaining principal balance comes due at the end of that term.
Interest-only mortgages may be a good choice for certain borrowers like those whose incomes fluctuate from month to month. However, this feature of Interest-only loans and mortgages can be either a benefit or a pitfall for borrowers. You must be disciplined enough to pay the principal even though you are not required to do so.
… Some people that may benefit from such a loan are, borrowers who expect their income to increase during the term of the loan, first time home buyers if they expect to upgrade their starter home to a bigger home soon, etc…
Another advantage of interest-only loans is that they require lower initial payments, which means borrowers can qualify for larger loan amounts than loans without interest-only options. [But this can also be the major disadvantage by allowing you to get in over your head too easily. ]
Interest only loans do carry higher risks, and borrowers must understand these risks.
· What if you do not see the increase in income you expected?
· What if you cannot sell your home later for a profit, or what if the market does not appreciate as much as you expected?
· What if the market depreciates?
There are dishonest lenders out there, and they often deceive borrowers when it comes to interest-only loans.
Because the monthly payment is less, a common deception is that the interest rate on an Interest Only mortgage is lower than the interest rate on loans without an interest-only option.
Comparing different types of loans is the most important step in choosing the best loan for you. At Integrity 1st Mortage, we are here to help you find the loan that fits your personal situation. We want you to make an educated decision. We know that every situation is unique, and understanding how loans are structured will help you make the right choice. Together we can identify your goals, and you will be able to identify the right loan to help you reach them. We are licensed specifically in Arizona and California and would be very interested in assisting you in any way – questions, please call or email.
Integrity 1st Mortgage
Keri Carter
619 / 884-7511 tel.
