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What Is An Interest-Only Mortgage?
Interest-only mortgages differ from traditional mortgages in that they do not require fully-amortized payments for the entirety of their term. Interest-only mortgage loans have a certain period of time when monthly payments are based solely on the interest accrued on the loan.
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The period of time in which interest-only payments are allowed is established by the lender. During this time, the borrower does not make payments on the principal of the loan; therefore, they gain no equity in the home. Making interest-only payments is similar to renting a home.
However, after the period of interest-only payments, the loan converts to a traditional mortgage. The borrower is then responsible for fully-amortized payments for the remainder of the loan’s term. This means that you would have to pay off your principal in a shorter amount of time.
Interest-only mortgage loans can be beneficial to college students and young professionals who expect their income to rise before the end of the interest-only term. This would allow them to live in their own home for a period of time before they can afford to start earning equity in it.
Borrowers who are considering entering into an interest-only mortgage loan should keep in mind that their monthly payments will be higher after the interest-only term than it would be on a traditional mortgage. They will not earn equity in their home during the interest-only payment period. Additionally, should the value of their home decrease, they could end up owing more than their home is worth.
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Mortgage rates are still low. Refinance & Lower Your Payment!
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- Save More and Spend Less!
- No Obligation and Free Expert Advice Another Great "bad-credit" Mortgage Company! QuickenLoans is also a competitive mortgage company for people with all types of credit including poor credit. Refinance or get new mortgage offers from this reputable Web based mortgage lender.
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- Competitive rates and no hidden fees
- Bad Credit OK
- New Purchases, Home Equity & Refinance
- One dedicated mortgage banker from first call to closing
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If you are looking for a mortgage loan but have "less than perfect credit" this company has options for people with credit problems. Complete a short form and get one dedicated mortgage banker from first call to closing with a simple, straightforward process.
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