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Interest Only Mortgage

Interest only mortgages are a less common type of home loan that many homeowners choose to begin the home ownership process with. As the name implies, borrowers with an interest only mortgage do not pay down their mortgage balance with their monthly payments – they only pay interest. This obviously results in a smaller monthly payment. However equity will not be established in the home to use for the future.

If you intend to live in an area where there is rapid appreciation. You can still make money on the sale of your home if this appreciation continues once you move in. Although you will have no equity in your home when you go to sell with an interest only mortgage. Your home may be worth more money and you will still profit. The challenge in making money in an area where there has been appreciation is dependant on how long you are willing to hold out at a higher sale price that may take longer to sell. Your real estate agent should handle these details with you to establish a reasonable sale price.

If you are considering an interest only mortgage you will want to establish a term that is manageable. Many homebuyers choose to have an interest only mortgage that is converted to a traditional fixed or adjustable rate mortgage after a time of 5 – 10 years. This way, borrowers are not stuck with an interest only loan when they hope to be able to afford the larger monthly payments of a traditional loan further down the road.

Oftentimes homeowners who opt for an interest only loan do so because they will be relocating in a few years and would like to have lower monthly payments in their temporary home. Other times the homeowner is someone who does in fact intend to stay in the home. These buyers often live in an area where the appreciation of their home is expected to beat the amount of equity they would pay down in mortgage payments each month. In this circumstance it is possible for a borrower to live in the home for years and still make money at the time the home is sold because of high appreciation in the property value.

 


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  Home Lending Resources
If you move frequently an interest only mortgage may suit your needs. You can get away with smaller monthly payments with the sacrifice of not building equity in a home you do not intend to stay in for very long anyway… FHA continues to be an actively involved area of home loans. The Federal Housing Administration insures a wide variety of homes making it possible to pay less money down on your home and take advantage of superior interest rates on your loan… Buy to let mortgages are a growing portion of the homeownership market. A buy to let mortgage is a mortgage taken out with the sole intention of renting out to others for the profit. They have their caveats but also numerous advantages such as an additional interest tax deduction…
2nd mortgages are mortgages for current homeowners to take out for up to 125% the value of their current home. Taking advantage of existing equity in your home can get you a lower interest rate… Interest rates fluctuate continually throughout the year. Looking at the indices that determine interest rates will help you gain a better understanding of what brings interest rate changes about…

Payment calculators can help you estimate your monthly mortgage payment. Among other things, payment calculators can also estimate the break-even date for refinancing and your new monthly payment with a debt consolidation loan…

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