Interest Only Mortgage Is It For Me

Title:

Interest Only Mortgage Is It For Me ?

Word Count:

623

Summary:

If you have been thinking about an interest only mortgage this article is a good read, as the terms on interest only is talked about here.

Keywords:

interest only mortgage,mortgage,real estate,real estate mortgage,mortage,interest only

Article Body:

Interest Only Mortgages is a risky product and does have its disadvantages.

Interest Only mortgages are tricky, because they can be misleading as the

payment is very small for the first 1,2,5,7 or even 10 years. Note that for the

Interest Only Mortgage you will have a balloon payment for the entire principal

balance at the end of the loan term.

Interest only mortgages might be beneficial for people in markets where houses

appreciate rapidly and the plan is to remain in the house for only a couple of

years.  Interest only mortgages are available in both fixed rate and adjustable

rate varieties, but most interest only mortgages are of the adjustable rate

variety.  Since only an interest payment is due, interest only mortgages

usually have a lower monthly mortgage payment than mortgages that require

principal and interest payments.  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.  The interest only mortgage rate is an adjustable rate determined by the

current interest rate.  This preset margin will stay fixed throughout the

remaining term of the loan while the interest only mortgage rate added to it

will change (generally on an annual basis) with the fluctuation of the current

index rate.  So after the interest only mortgage payment period is over you

will be paying the adjusted interest only mortgage rate and the principal,

which will increase your interest only mortgage payments. 

Interest only mortgages usually have an interest only payment option during the

first 1, 3, 5, 7, or 10 years of the mortgage.  Interest only mortgage payment

does not mean negative amortization.  Interest only mortgage payment loans are

generally not long term solutions.  Interest only loans for a fixed period of

time.  Interest-only loans are the latest tool aimed at offsetting high home

prices.  Interest-only loans represent a somewhat higher risk for lenders, and

therefore are subject to a slightly higher interest rate.  Interest-only loans

are popular ways of borrowing money to buy an asset that is unlikely to

depreciate much and which can be sold at the end of the loan to repay the

capital.  Interest-only loans helped homeowners afford more home and earn more

appreciation during this time period.  Interest-only loans may turn out to be

bad financial decisions if housing prices drop, causing those borrowers to

carry a mortgage larger than the value of the house, which in turn will make it

impossible to refinance the house into a fixed-rate mortgage. 

It is important to keep in mind the nature of interest only mortgages.

"Although interest only mortgages play a vital part in the mortgage industry,

often providing the only means for first time buyers to hold the key to their

own front door, misusing this type of loan is counter-productive. A sample of

the 3 payment options on a loan amount of $250,000 would be:Minimum Amount Due

$804, Interest Only Mortgage $989, 30 year payment $1304, 15 year payment. In

summary, an Interest Only Mortgage Loan can save you thousands of dollars and

possibly earn you thousands more with the right diversified investments over

time.  An interest only mortgage loan gives people the tools necessary to

manage their debts as carefully as they manage their assets.  30 year interest

only mortgages typically come with a ten year (often referred to as a 30/10

year interest only loan) or fifteen year fixed (30/15) interest only period.

Best for people who:   Are very focused on money management Want to reduce

their monthly mortgage payment Do not intend to be in their homes more than a

few years Interest only mortgages and loans as the name suggests, means you pay

interest only for the first three, five, seven, ten years of the loan, thereby

lowering your monthly mortgage payment by quite a lot.