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INTEREST ONLY MORTGAGES AND HIGH-PRICED HOMES
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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