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Lowering your house payments through an interest only mortgage and freeing up cash |
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for other needs, such as opening a business, home renovation, etc. can be very beneficial to you.
Interest only mortgages typically convert to standard principal and interest loans after a few years. But consumers have become more aware of all the different types of mortgages during the recent housing and refinancing boom. While no one tracks exact numbers, lenders at companies report a surge in interest-only loans over the past 5 years.
Interest-only loans are probably a bad idea if you plan to keep your home forever, |
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or you are close to retirement, or live in a neighborhood where home prices look likely to stagnate or decline. They're best suited to homebuyers who are sure they're going to move or are expecting to make more money before the interest-only period expires.
Such a loan works well for established business owners who have inconsistent cash flow because it allows them to pay principal when they choose or take the money they would have put toward principal and use it for their business.
Both fixed interest rate and adjustable-rate mortgages can be set up to require only interest payments, but expect to pay a rate about one-eighth to one-fourth of a percentage point higher than you would for standard loans. |
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