Mortgage Options Series - Interest - Only Loans

Feb
21

Welcome to the third in the series of top 5 most popular mortgage options. So far we have looked at fixed rate mortgages and ARM or adjustable rate mortgages. Today we are looking at Interest-Only loans. To me, the next two loan options in the series, Interest-Only and Balloon loans are very risky. Keep in mind though, that there are certain situations where you can make it work for you instead of hurt you. You just have to be very careful and know the terms of your loan inside-out.

An Interest-Only mortgage loan works this way. You pay only interest for the first x number of years, depending on the terms of your loan. Your mortgage institution will determine the amount of interest to be paid on the life of the loan and then let you work on paying that down first. Wachovia, for example, lets you pay interest only for the first 15 years of your loan. This is great if you want to deduct a large amount of interest off on your taxes every year. However, keep in mind that you are not making a single payment on the principle unless you are paying more than your minimum payment each month. Even then, you have to check the terms of the loan to make sure your extra payments are going to principle. So if you want to sell your home sooner than later, you will have accumulated no equity.

At the end of your interest-only payment period, you are then going to pay on the principle of the loan. So if you have a 30 year loan, the entire principle will be paid in 15 years. Your payment is usually fixed from this point on as the majority of your interest has been paid. If you are planning on moving before you get to this point, then the Interest-Only mortgage option might work for you as your payments will be lower and more manageable.

Each one of the mortgage options talked about in this series lets you see the options available to you. It is up to you as to which one you want to take advantage of. I have tried to show you the pros and cons without personal bias. I have to tell you, though; it is difficult to do that as I want you to enjoy the home you choose to buy. Stressing over a mortgage is not worth loosing that joy. So take your time and talk to us about your options here in Fort Lauderdale and Broward County. Find the right kind of mortgage for you and your situations and you will have a great time. See you next week when we talk about balloon mortgage loans.

If you are still wondering what all this means, contact Best Rate Mortgage House and let us sort out all the details for you.

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