| Interest only mortgages can be an excellent tool for a | | | | a short term financial need; however, problems arise |
| short-term financial need. It is important to know what | | | | when homeowners that do not fully understand |
| you're getting into with an interest only loan before you | | | | interest only mortgages use them for the wrong |
| borrow. Here are several tips to help you keep you | | | | reasons. |
| out of trouble when financing your home with an | | | | Disadvantages of Interest Only Mortgages |
| interest only mortgage. | | | | Many homeowners use interest only mortgages to |
| Traditional mortgage loans have monthly payments | | | | purchase their homes because of easy qualification |
| that are amortized for the entire duration of the loan. | | | | and low payments. Many of these homeowners don't |
| This means every month that you make a payment, | | | | realize the interest only payments only last for a short |
| part of that payment is applied to your finance | | | | period of time. At the end of the interest only period |
| charges in the form of interest, and part is applied to | | | | the lender converts your loan to a standard Adjustable |
| pay down the principle loan balance. Interest only home | | | | Rate Mortgage and will add the loan principle back into |
| loans are different than traditional mortgages in that | | | | your payment. When this happens your entire loan |
| they do not have fully amortized payments during the | | | | balance will be amortized for the remaining duration of |
| interest only period. | | | | your loan. Suppose you took out a 30 year interest |
| Interest Only Mortgage Payments | | | | only mortgage for $250,000 with a five year interest |
| For the first part of your mortgage loan, the interest | | | | only period. At the end of the interest only period your |
| only period specified in your loan contact, your monthly | | | | payment will be based on paying $250,000 back over |
| payment is based solely on the amount of interest due | | | | 25 years. This results in a significantly higher mortgage |
| that month. Because there is no loan principle included | | | | payment. |
| in your payment amount, interest only payments are | | | | You can learn more about your mortgage refinancing |
| much lower than traditional mortgage loans. Savvy | | | | options including costly mistakes to avoid by registering |
| homeowners can use interest only payments to meet | | | | for a free mortgage tutorial. |