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Interest only home loans allow buyers to afford more expensive homes, with less money. There are many different types of interest only home loan products being offered by lenders.

How do interest-only loans work?
Understanding the basics of how interest only loans work is easy. You are only obligated to pay the interest part of your monthly mortgage payments for a set period of time. This is beneficial for you because you are freeing up money to use as you wish. Interest only loans are set-up to last for a few years (usually 3-5 years) from the time of loan origination. During the beginning years of any home purchase mortgage, the majority of you payment goes towards interest anyway.

During the interest-only period, you will not be able to build any equity in your home. However, you will be able to buy the home you want, instead of having to settle for a less expensive home that is not your first choice.

What happens when the interest-only time period is over?
When the time period of interest-only loans is over, your loan goes back to its initial terms. Your monthly required payments are going to increase to exhibit the full amortization for the remainder of the loan. For example, at the conclusion of a 3-year interest only loan, a 30 year mortgage would fully amortize over 27 years.

Are there any advantages to interest-only mortgage loans?
As mentioned, the main benefit of utilizing an interest-only loan is to get more home than you would normally be able to afford. Interest-only loans also offer great tax benefits.

Some tips...
Since interest-only loans are usually variable rate loans, you should consider refinancing to a fixed rate before your interest-only period expires. This will allow to convert your variable loan into a more secure fixed-rate mortgage.

Another good idea to follow during the time that you are in your interest-only period is to invest as much money of your principal portion as you can.

With Star Loan Services, you can apply for low rate interest only new home loan even with bad credit!




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