Interest only home loans are loans where you pay
interest only for a period of time. Having the interest
only payment, your monthly payment will be lower than it would
be with an interest and principal loan payment . Your interest
rate typically is lower than a traditional mortgage, and you
have the option of flexible payments.
Interest only home loans
allow you to free up cash flow. Lots of investors are using
the interest only home loan option buy investment properties.
Why should I consider an Interest only home loan?
On a traditional 30-year fixed-rate home loan most of the payment
goes toward interest during the first seven to ten years of the
loan. It is not until after over 20 years that you are paying half
principal and half interest. Interest only home loans are particularly
good for people planning to live in their home for less than ten
years. The average homeowner stays in their home between five and
seven years. Interest only home loans let you make a lower home
loan payment for this period of time allowing you to pay down higher
interest debt like credit cards. Depending on your loan amount
you could have access to thousands of dollars over the course of
several years to invest or reduce your higher interest debt.
What are the negatives?
With an interest only loan, you are not paying any of the principal
balance of your mortgage. You will owe the same in five years as you do today.
This is a negative that needs to be weighed if you decide that
an interest only loan is the direction you want to go.
But I like the security of a fixed rate home loan…..
There are some great interest only home loans available now that
give you the best of both worlds. I have programs available that
are fixed for 30 years, giving you up to 15 years of interest only
payments, after which you pay principal and interest amortized
over the remainder of the loan, keeping your locked in interest
rate.
