Interest Only Products are all
the rage, but are they right for you?
Most Americans assume it's always
best to pay down their mortgages as quickly as they can.
But in a lot of cases that's not always true. With
an interest only mortgage loan, the borrower takes out a
30-year mortgage, electing to pay interest only for a set
period of time, such as 3, 5, 7 or 10 years. After the end
of the interest only period, the monthly payments readjust
to include the principal, and the loan is re-amortized for
the remaining years which can cause the payment to rise
substantially. At this point, most people either
refinance, start paying off the principal, or sell their
property. Studies have shown that homes are sold on
average every 5 to 7 years. So, if you plan to sell within
that period, why pay principal when the first 10 years of
a mortgage payment are mostly towards interest?
An Interest-Only Mortgage may be a
good fit for you if:
- Your income is mostly from Commissions or Bonuses
- You expect to Earn a Lot More in a few
years and want to Maximize your Buying Power Now
- You will Invest the Savings by not
paying Principal on your Mortgage and put it into Higher
Interest Returning Investments
- You Invest in Real Estate and want to
keep your payment low and keep the property for a short
time
Advantages of
Interest Only Mortgage Loan Payments
The advantage of an interest-only loan is that it
allows a borrower to free up capital to invest in assets
that yield the highest return, or serve some particular
financial-planning purpose, rather than locking it up in a
house. For example, you could take the money you'd be
paying in principal each month and:
- Pay Down more Expensive Debt such as Credit Cards
- Set it aside to help pay for a Child's College Fund
- Invest it in the Stock Market over the long haul
- Invest More in your Employer's matching 401(k)
Contribution Plan
This flexible mortgage gives people
the tools necessary to manage their debts as carefully as
they manage their assets.
Apply Now!
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