An interest only mortgage may sound like a strange arrangement, but there are several circumstances that make it appropriate. For instance, if you are only planning on staying in your home for a short period of time, it may make sense to get by with less monthly payments instead of using the extra money to pay down the balance on the loan.
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Interest only mortgages are exactly as they sound. They are mortgages in which your monthly payments work to only pay down interest. There are two obvious effects from this arrangement. First of all your monthly payments are smaller because you are not paying down the balance of your mortgage. Second, you are not building equity in your home.
Interest only mortgages are not for everyone. Only speaking with a qualified mortgage professional can reveal the best possible fit for your loan needs. On our site we offer a free short no obligation application to get competing quotes and loan information from mortgage broker professionals.
Interest only mortgages can be a practical consideration in housing areas where the appreciation of the homes is greater than what your monthly mortgage payments would pay down on the balance of a conventional loan. For example, if you only lower your mortgage balance by 4% with a conventional loan, but you decide to do an interest only loan and your home appreciates by 4%, you can still make money at the time your home sells.