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March 8, 2011

Interest Only Mortgages-How Do they Work?

Filed under: Mortgage — Tags: — admin @ 12:48 pm

Interest only mortgage options are available to you, and though most mortgage brokers consider them extremely risky, knowing the information for yourself will help you to decide what’s best for you.

Are Interest Only Mortgage Right For You?

An interest only mortgage is a mortgage property that is designed so you can pay only the interest on your monthly payment, or choose to make a payment toward your principle as well. Often, you’ll find that mortgage brokers avoid selling an interest only loan because they feel that they’re too risky, but you can make the choice for yourself if you know the truth about these types of loans. Of course, not every loan will be right for every consumer, and this is especially true for these products. If you are thinking about using a loan like this, then you need to have a plan in effect.

What, Exactly, Is An Interest Only Loan?

These are loans in which you only have to pay the interest due on your mortgage each month, for a certain term. At the end of this term, you’re presented with a variety of options. The term is generally between five to seven years.

Pay Off Your Principal

The interest only payments will not affect the principal at all. Once the term is up, you can then choose to start making payments on your principal. At this point your payments will increase, but the overall balance won’t change.

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