 |
|
|
|
Mortgage Calculators. |
|
Learn how much you can afford
with our set of mortgage calculators. |
|
|
 |
Calculate
Payments |
|
|
|
|
|
|
Home Page |
|
Return to our home
page and start searching for other home loan
topics. |
|
|
|
|
|
Interest Only Loans |
|
Lower
Payments ... Greater Purchasing Power ...
It is Possible ... |
|
Before we explain interest only
financing its important to clarify these loans are
not for everyone and with
rising interest rates more
people have these loans than probably should. The
success of benefiting from this type of financing often
falls into whether or not the homeowner has enough self
discipline to exercise the interest only payment option
only when they need to.
For homeowners who believe the only way to own a home is by
securing an interest only loan than you should probably look
at lowering your price range. These
loans were originally created for wealthy consumers - not
for the average income maker. |
|
|
|
|
Fact: it wasn't until
2002 that interest only loans become readily available in the
mortgage industry - even though they have been around for
decades. |
|
What is
an Interest Only Loan? |
|
Unlike traditional principal and
interest home loans these programs provide consumers with an
option to enjoy lower "interest only" payments for defined period of the note.
These programs have several advantages including
Greater Purchasing Power,
Payment Flexibility and
Reduced
Qualifying Income
however they also include such disadvantages as
Possible Payment Shock,
Short Term Security
and Larger Down Payment
Requirements. |
|
|
|
Benefits of Interest Only Financing |
|
Fact: Interest
Only Loans are not everybody however these programs do have
a place in today's market, offering a number of benefits to
the right homeowner |
|
|
|
1.)
Greater Purchasing Power |
|
Interest only mortgage programs allow a
consumer to use a lower qualifying payment on the mortgage
application which in turn increases the maximum loan amount
a lender is willing to lend. |
|
|
|
2.)
Payment Flexibility |
|
Even with
a prepayment penalty (many of these programs do not have
them) it's common for mortgage lenders to allow a homeowner
to prepay up to 20% of the loan's principal balance any
calendar year. Of course, without a prepayment penalty
you can pay more. Many consumers choose interest only
loan financing because they are provided the opportunity to
pay down the principal on their own time. Self
employed, commission-based salespeople and consumers who
receive paychecks at irregular times often appreciate this
program benefit. |
|
|
|
3.) Reduced Qualifying Income |
|
Most lenders state
that if a consumer is applying for an adjustable
rate mortgage where the initial interest rate is
fixed for a period of three (3) or more years
than the borrower can qualify on the initial
payment. If you choose an interest only
loan with such terms then your lender qualifies
your application on the lower payment.
This varies from lender to lender so check
before you apply. |
|
|
|
4.) Choice between Fixed & Adjustable Rates |
|
Interest only loans
now make up a very large portion of mortgage
loans so lenders continue to roll out new
programs. With the increased popularity
has also come many options including fixed rates
for the entire term of the loan. |
|
|
|
Questions
to Ask |
|
We try to group
all questions for home loan programs into two
(2) categories. |
|
Ask Yourself... |
-
Are you
comfortable with sacrificing mandatory
principal payments for lower monthly
obligations?
-
If property
values fall will you still have enough
equity to meet your long term goals - will
you be upside down if the market corrects
10%?
-
What are your
reasons for an interest only loan? Are
you self disciplined enough to make extra
principal payments on your own time?
-
If you can
afford a P&I payment why would you want an
interest only loan?
-
Do you believe
you can earn greater returns elsewhere or do
you simply want the extra cash for spending
money?
|
|
Ask Your Lender... |
-
Difference in rates and monthly payments
between a fixed rate mortgage and interest
only programs
-
What
happens if you make a principal payment?
Is your payment lowered the next month?
-
About
Fixed Rate Mortgages with Interest Only
Options. This may be an
alternative where you can realize the
security of a fixed rate but have an option
to make interest only payments when your
budget needs it.
|
|
|
|
|
|
